Employers battle a 4 month window to put schemes in place to maximise tax advantages before April 2017 cut off
The announcement in the Chancellor’s 2016 Autumn Statement that, as of 5 April 2017, most new company car salary sacrifice schemes will be axed, means that the opportunity to benefit from tax and employer National Insurance advantages will be significantly reduced.
Schemes that are in place before the deadline will be able to run until April 2021.
With a four month window to administer a salary sacrifice scheme before the 2017 deadline, a huge escalation in the number of registrations is expected.
The enforcement excludes schemes using ‘ultra-low emission cars’ (sub 75g/km).
If you are considering putting a scheme in place, we advise that you take into account the following points. Please contact us if you would like to discuss your options.
- Employment contracts and service agreements of affected individuals should be drafted carefully. The employee should not be able to opt out at any time, giving up the non-cash benefit and reverting to the pre-sacrifice salary, as the non-cash benefit may be taxable as earnings. Changes should last for at least 12 months to minimise this risk.
- Remuneration under the contract must be validly sacrificed before the employee is entitled to receive it under the original contract.
- The salary sacrifice arrangement must fall within the disguised remuneration rules.
- A disclosure may be required under the direct tax or NICs disclosure rules.
- There may be VAT implications of the provision of the benefit.
- Corporation tax deduction may be due to the employer.
- Specifying "shadow salaries" for other remuneration purposes may be possible.
Chancellor Philip Hammond has announced today the tax and employer National Insurance advantages of salary sacrifice schemes will be removed from April 2017.