Chancellor Philip Hammond has announced today the tax and employer National Insurance advantages of salary sacrifice schemes will be removed from April 2017.
Exempt though are arrangements relating to pensions (including advice), childcare, cycle to work and ultra-low emission vehicles.
“This will mean that employees swapping salary for benefits will pay the same tax as the vast majority of individuals who buy them out of their post-tax income,” said the Treasury following the Autumn Statement.
“Arrangements in place before April 2017 will be protected until April 2018, and arrangements for cars, accommodation and school fees will be protected until April 2021.”
Colin Tourick, professor of automotive management at the University of Buckingham, believes there will be a general sense of shock in the industry that the chancellor has changed the arrangements for taxing salary sacrifice schemes.
“You can see why he has done it,” Tourick told AM sister title Fleet News.
“He expects to raise more than £230 million per annum once the new system has bedded in in 2018-19.
"However, all is by no means lost for the fleet industry and those employees who have salary sacrifice cars or planned to have them.
“People already sacrificing salary will continue to enjoy the benefits for four years.
“We can expect a huge rush in ‘salsac’ registrations between now and April 5, when the new rules come into force.
“And employees can continue to enjoy the benefits of ‘salsac’ if they choose an ultra-low emission car, which is no great hardship as there is now a good selection of sub-75g/km cars on the market, with more to come soon.”
He concluded: “All in all, whilst this is not the outcome the industry was hoping for it’s by no means a disaster.”
Irishboy4 - 25/11/2016 10:33
The time must come when the treasury taxes the companies that are using supposed short term purchased cars, such as Mercedes who typically sell a car to an employee over a three month period at a low finance rate and then buy it back, to sell it through their network. The employee is then only taxed on the finance subsidy. Porsche UK also do this and the lucky manager ends up with a Cayenne at 150 quid a month. A loop hole simply waiting to be closed! It is costing the UK millions in lost tax revenue.