Is salary exchange about to be sacrificed?

Amba

It won’t have escaped your attention that the government is casting its beady eye on the subject of salary exchange (or salary sacrifice) schemes. Or to put it another way, a consultation is underway on proposed changes to the rules.

When employees ‘buy’ benefits in exchange for a reduction (‘sacrifice’) in their gross salary, there can be tax and National Insurance (NI) savings for employers and staff alike. Now the chancellor has become a little twitchy about the impact on the public purse.

If the doom-mongers are to be believed, this could sound the death-knell for flexible benefit programmes. But let’s hold on a moment – it’s still only a consultation so nothing is set in stone. And the truth is, it could be nowhere near as bad as it sounds – despite what others have been reporting.

Reasons to be cheerful

At Amba, we prefer good news to bad, and we firmly believe that the impact of any changes will be minimal. Why? Well, here are a few reasons to be cheerful.

  • Crucial benefits will be unaffected – namely pensions (including employer-provided pension advice), childcare vouchers and bikes. These are benefits that really count for employees, and they will remain the attractive, tax-efficient options they’ve always been.
  • What’s more, the proposals have no impact on payroll giving, flexible working or holiday trading.
  • In fact, the benefits in kind being targeted by the government are relatively narrow, which means that many can still be used in a cost-effective way to attract, retain and reward the best people.
  • Let’s not forget too that employees will still enjoy NI savings through salary exchange. Offering flexible benefits in this way remains a real bonus, particularly for basic rate tax payers, and ultimately, if it works for them, it will work for you too.

And that’s really what it’s all about. Our ethos is ‘happy people, happy business.’ We believe that anyone implementing flexible benefit schemes purely to save on tax and NI may be missing the point.

How Amba protects our clients

Of course, we’re not whitewashing the fact that some of the changes could mean a reduction in tax savings for some employers. But for many these are likely to be small. And thanks to the way that we’ve introduced benefits to our online platform, many will be unaffected.

Let’s take computers, for example. Unlike some providers, we haven’t suggested complicated computer purchase schemes to minimise employer and NI contributions. Our clients enjoy a simplified offering which shouldn’t be impacted at all, if and when changes come into effect.

The good, the bad and the…not so bad

But before you think we’re running away with the positives, let’s acknowledge that there may be some trouble ahead. Some, but not much. So let’s take a moment to weigh up a couple of cons – and the corresponding pros.

Why it could hurt

  • It’s true that company car schemes may be hard hit.
  • Car parking and health screening offered through salary exchange could be affected.
  • Engineered computers and phone schemes may also feel some impact.

Why it possibly won’t

  • Understandably however, opposition is rife and if many voices unite, the government may be forced to take heed. Green motoring is being actively encouraged, so hitting car schemes that promote this might prove to be a bit of an own goal! If there are changes, we’d hope they wouldn’t affect those who have already taken the benefit.
  • Take up of these benefits is often relatively low, so employers missing out on tax and NI savings probably won’t feel the pinch. And what about preventative health screening easing the burden on our beleaguered NHS? (OK, let’s not even go there…) Mind you, there have been some angry objections to the impact on health assessments, so the least we can look forward to on this topic is a ‘healthy’ debate.
  • But this won’t affect Amba clients, even though some businesses will need to look at their schemes.
    Of course, if the business pays for your employees’ benefits, either as a universal offering or by allowing your staff to choose from a flexible pot or benefits fund, the great news is you won’t be affected at all. So you can continue to offer a wide range of interesting and appealing options that will keep your people happy.

When it won’t hurt at all

Here at Amba we firmly believe that staff need to feel valued, and offering them flexible, online benefits does just that. Benefits are much more than ‘extras’ and shouldn’t ever be swapped for cash – we’re with HMRC on that (although we hate to admit it).

Let’s face the music

So let the consultation continue – and remember that at this stage, that’s all it is. If you have suggestions or concerns, make your views known to the government and we’ll do likewise.

Listen out for what the Chancellor has to say in his Autumn statement. We’ll be in touch with you straight away to explain how, and even if your scheme is affected.

The truth is, for our clients, we don’t believe there’s much trouble ahead. There may be a few tweaks and adjustments, but nothing more. So if anything is to be sacrificed, it shouldn’t be your sleep.

This consultation closed on 19 October 2016.

If you are struggling to sleep during these warm late summer nights, you can view the full consultation document here: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/549682/Salary_sacrifice_for_the_provision_of_benefits-in-kind_HMRC_consultation.pdf