Salary Sacrifice Arrangement s and the changes to VAT

From the 1^st January 2012, the HM Revenue and Customs issued a new guidance on the way in which employers should treat VAT for the salary sacrifice arrangements. This will affect you if you offer schemes such as Cycle to Work or Childcare Vouchers.

Why the Change?

Following a recent case, the European Court of Justice (ECJ) took the decision to issue a new ruling in the way in which VAT was treated in regards to salary sacrifice arrangements.

What this means is that output VAT must be declared on goods or services that are provided to employees in return for a deduction in salary or under a formal salary sacrifice arrangement.

In turn, the employer will be able to recover the VAT incurred on the costs relating to the provision of goods and services to the employees.

Summary of the impact

The following information is taken from HMRC.gov.uk and provides a summary of the impact on common supplies made by employers to employees:

• ·         Cycle to Work Scheme
• ·         Face value vouchers
• ·         Childcare vouchers
• ·         Food and catering provided to employees
• ·         Benefits provided to all without payment
• ·         Cars

For more information on this change or to discuss further how this will affect your business, please contact High Performance Consultancy on 0844 800 5932 or alternatively complete the ‘Contact Us’ form on our website and one of our experienced consultants will get back to you. http://www.highperformanceconsultancy.com/contact-us/