Changes to salary sacrifice rules
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Salary sacrifice
has for many years been popular with employers as a way of
rewarding staff.
Employees elect to receive vouchers which they can then redeem
against goods or services, like childcare or computers.
Many larger employers, such as Astra Zeneca, extended it to
include selected retail outlets.
The advantage to the employee stems from the value of the
voucher being deducted from their salary before tax.
Many employers reclaimed the VAT on the vouchers through their
input tax, but were not required to account for the VAT when
passing the vouchers on.
HMRC disagreed and the tax tribunal took the case against Astra
Zeneca to the European Court of Justice (ECJ).
In August the ECJ ruled in favour of HMRC, finding that Astra
Zeneca should pay the VAT on the vouchers.
As a consequence, many businesses operating similar schemes with
retail vouchers will now be required to account for the VAT
retrospectively.
The final outcome is that salary sacrifice schemes are now
considerably less attractive.
- For assistance on any aspect of staff remuneration contact Glen
Thomas on 01622 690666 or email glen.thomas@dsh.co.uk
Tuesday, October 11 2011
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