In his Autumn Statement speech, Chancellor Philip Hammond announced plans to significantly tighten the rules that currently govern benefits-in-kind (BiK) and salary sacrifice.
Under the government’s plans, frivolous uses of the salary sacrifice loophole will undergo a major crackdown, with the government stating that they will ‘look specifically at how the taxation of BiK and expenses could be made fairer and more coherent’.
The Chancellor revealed that, from April 2017, the tax and employer national insurance advantages associated with salary sacrifice schemes will be removed.
Benefits such as gym memberships, school fees, accommodation fees and mobile phones will be affected under the government’s new rules.
However, BiK arrangements relating to pensions, childcare, ultra-low emission cars and the Cycle to Work scheme will be excluded. Arrangements in place before April 2017 will be protected until April 2018. Specific long-term arrangements will also be protected until 2021.
Commenting on the issue, the Chancellor said: ‘The majority of employees pay tax in a cash salary. But some are able to sacrifice salary and pay much lower tax on BiK.
‘This is unfair, and so from April 2017 employers and employees who use these schemes will pay the same taxes as everyone else.’