VAT changes will affect salary sacrifice benefit schemes from 1 January 2012
15 Aug 2011
HM Revenue & Customs has recently issued new guidance on the VAT treatment of different benefits supplied by employers under salary sacrifice benefit schemes. This guidance, detailed in Revenue & Customs Brief 28/11, follows the European Court of Justice decision in the case of Astra Zeneca last year.
What will change?
From 1 January 2012, all salary sacrifices will be treated as payment for the underlying benefit. Where the benefit is liable to VAT eg retail vouchers, meals or arrangements such as 'cycle to work' rentals, employers will have to account for the tax – although they will be entitled to reclaim any VAT incurred in supplying the goods or services in question.
Where the amount sacrificed is less than the cost to the employer of providing the benefit, VAT will have to be declared on the higher amount.
There is some good news in that HMRC has confirmed that VAT will not be payable on the supply of childcare vouchers because the underlying supply is exempt from the tax. However, employers should be aware that HMRC may expect them to make a restriction on any administration or 'overhead' VAT incurred in providing such benefits. Find out more about the HMRC's briefing.
What actions do you need to consider?
You should review the VAT position on salary sacrifice schemes before 1 January 2012 when these changes come into effect to ensure they remain as tax efficient as possible.
Grant Thornton have both VAT and Employer Solutions specialists who can help review arrangements in the light of these changes. We can help you to provide the best possible offering for your people.
For further information please speak to:
Mike Sheppard
For Grant Thornton UK LLP
T 0121 232 5419
E mike.sheppard@uk.gt.com
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