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Date: 23/12/2016

Employers are being warned that they urgently need to review the way they offer benefits to their staff, following a government clampdown on so called salary sacrifice schemes.

Top 40 accountants Bishop Fleming issued the warning after examining the details of the Finance Bill that was issued following the Autumn Statement.

Benefits including company cars, white goods, independent school fees, workplace parking and mobile telephones will all be affected.

From 6 April 2017 the tax and National Insurance Contribution (NIC) advantages of schemes that allow employees to give up part of their salary in exchange for benefits will be removed in order to create a level playing field between those employers who offer benefits through salary sacrifice and those who don't.

In future, employees who swap part of their salary for benefits will have to pay the same tax as employees who buy benefits out of their taxed income.

Bishop Fleming's Head of Tax, Andrew Browne commented: "The tax office was keen to clamp down on these schemes as it was losing revenue. However, arrangements in place before April 2017 will be protected up to April 2018; and arrangements for cars, accommodation and independent school fees will be protected up to April 2021."

Benefits not affected by the change and which will continue to be available for salary sacrifice will be pensions (including advice), childcare, cycle to work and ultralow (75g/km) emission cars.

Mr Browne remarked: "The transitional arrangements and exemptions are welcome, and in particular the exemption for very low emission cars - although there are not many cars that will fall within this exemption."

For benefits not excluded by the change, tax and NICs will be levied on the higher of the taxable value of the benefit and the amount of cash given up under the salary sacrifice scheme.

The Bishop Fleming partner warned: "This change is just the start of a tightening up of the rules, as the government has promised to further review how staff benefits are valued for tax purposes. We can expect to see more tax restrictions in the future."

He added: "Employers would be well advised to review their current benefit packages without delay to ensure they meet the new rules."