Press release: Government fails to heed warnings as it moves forward with salary sacrifice reforms

The ATT had urged the Government to think ‘long and hard’ before rewriting the rules around salary sacrifice as they may harm the competitiveness of UK firms at an already difficult time and not achieve a desired simplification of tax. Salary sacrifice schemes are an essential part of remuneration strategies for businesses. They allow employers to attract and retain the best employees. Each employee has different requirements and the ability for individual employees to negotiate their own package is now an essential part of recruitment, the ATT said.

Yvette Nunn, Co-chair of the ATT’s Technical Steering Group, said:

“It is really disappointing that despite comments we and other stakeholders made during the consultation period that the Government has decided to plough ahead with the proposals, which will introduce considerable complications to this area and also increase the probability of the employer getting it wrong. The reported changes will lead to scenarios where one employee might be on the same flexible benefits package as another employee but they are taxed differently simply due to whether the package was negotiated before or after joining the firm, which can cause errors among other issues.

“The Chancellor did announce some ‘long-term’ protection for existing salary sacrifice arrangements but the details provided in the speech are unclear and from the details in the Autumn Statement document, it does not appear to be much of a ‘long-term’ protection. There is mention of protection for existing schemes set up prior to April 2017 but only for one year until 2018, while schemes involving cars, accommodation and school fees will be protected until 2021. While on the face of it this is an extra four years protection we would not class this as ‘long-term’ and it only applies to a very narrow range of schemes. We do not believe that these concessions will limit the detrimental impact these reforms could have on UK businesses and their employees”

In today’s Autumn Statement, the Chancellor announced that, following consultation, changes would be going ahead with the effect that the tax and employer National Insurance advantages of salary sacrifice schemes will be removed from April 2017, except for arrangements relating to pensions (including advice), childcare, Cycle to Work and ultra-low emission cars. This will mean that employees swapping salary for benefits will pay the same tax as the vast majority of individuals who buy them out of their post-tax income.