Changes to Statutory Parental Bereavement Pay and Optional Remuneration Arrangements for Income Tax and National Insurance contributions
Published 3 March 2021
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Who is likely to be affected
Employees who receive Statutory Parental Bereavement Payment (SPBP) from their employer and also receive certain long-term salary sacrifice benefits.
General description of the measure
This measure will ensure that employees who receive certain long-term salary sacrifice benefits do not lose entitlement to a tax advantage if they also begin to receive SPBP.
The relevant long-term benefits include certain employer provided vehicles, employer provided living accommodation and relevant school fees arrangements.
Policy objective
This measure is designed to minimise the financial burdens for employees by ensuring that SPBP is not treated as a variation in contract in relation to relevant long-term salary sacrifice benefit arrangements.
Background to the measure
The Optional Remuneration Arrangement (OpRA) legislation, introduced on 6 April 2017, largely removed the Income Tax and National Insurance contributions advantages for most employment related benefits provided through salary sacrifice schemes.
Transitional rules for relevant long-term benefits (employer provided living accommodation, relevant school fees arrangements and certain employer provided vehicles), allow for the previous benefit valuation rules to continue to apply until 5 April 2021, provided there is no variation in an employee’s employment contract.
Statutory payments are normally treated as a variation in contract. However, these were specifically listed and disregarded from the 2017 OpRA legislation.
On 6 April 2020, a new statutory payment, SPBP, was introduced through the Parental Bereavement (Leave and Pay) Act 2018. The SPBP is payable to employed parents or partners of a parent who loses a child (biological, adoptive or born to a surrogate) under the age of 18 or suffers a stillbirth from 24 weeks.
This statutory payment is not listed within the 2017 OpRA legislation as one that can be disregarded for the purposes of making contractual changes as it did not exist at the time.
Therefore, where an employee is in receipt of SPBP and one or more of the relevant long-term benefits through a salary sacrifice arrangement, the variation to their employment conditions within the OpRA legislation meant they would lose their entitlement to the Income Tax and National Insurance contributions advantages of receiving the benefit in this manner.
This measure therefore includes SPBP as a statutory payment that will be disregarded from the 2017 OpRA legislation.
Detailed proposal
Operative date
This measure will have effect on and after the date of Royal Assent to Finance Bill 2021 and will apply retrospectively to the tax year 2020 to 2021.
HMRC will exercise its collection and management powers and will not collect any Income Tax and National Insurance contributions liabilities prior to the date of Royal Assent.
Current law
Transitional protections for relevant long-term salary sacrifice arrangements entered into on or before 5 April 2017 are set out in Paragraph 62 of Schedule 2 Finance Act 2017.
Sub-paragraph 9 of Paragraph 62 of Schedule 2 sets out variations which are not considered to end the transitional arrangements. These variations include entitlement to statutory sick pay, statutory maternity pay, statutory adoption pay, statutory paternity pay and statutory shared parental pay. This list was complete and exhaustive at the time of drafting but does not include SPBP which was introduced in April 2020.
Non-inclusion of SPBP means that if an employee becomes entitled to receive SPBP, it is considered a variation in the OpRA and the transitional arrangements would no longer apply. The benefit in kind provided through the salary sacrifice arrangement would become chargeable to income tax and National Insurance contributions under the OpRA provisions.
Proposed revisions
To prevent employees from losing the advantage of having their benefits provided through a salary sacrifice arrangement, retrospective Finance Bill legislation will be used to include a disregard for SPBP within the OpRA legislation. Therefore, employees in receipt of one of the long-term benefits and SPBP will be subject to the original OpRA rules, which continue to provide a tax advantage until April 2021.
Summary of impacts
Exchequer impact (£m)
| 2020 to 2021 | 2021 to 2022 | 2022 to 2023 | 2023 to 2024 | 2024 to 2025 | 2025 to 2026 |
|---|---|---|---|---|---|
| negligible | - | - | - | - | - |
This measure is expected to have a negligible impact on the Exchequer.
Economic impact
This measure is not expected to have any significant economic impacts.
Impact on individuals, households and families
The measure is expected to impact a small number of individuals who receive Statutory Parental Bereavement Pay and also receive one of the relevant long-term benefits covered by the transitional provisions. For those who do, they will continue to be eligible to receive the Income Tax and National Insurance contributions advantages of their benefit being provided under a salary sacrifice arrangement.
Customer experience is expected to remain broadly the same as it does not alter how individuals interact with HMRC.
There is expected to be no impact on family formation, stability or breakdown.
Equalities impacts
This measure will affect some employees in receipt of SPBP, and it is likely that a proportion of those will fall into the pregnancy and maternity protected characteristic group. It is not anticipated that there will be impacts for any other groups sharing protected characteristics.
Impact on business including civil society organisations
This measure is expected to have a negligible impact on employers who provide their employees with one of the transitional benefits. This measure ensures they are able to continue operating the salary sacrifice scheme even where the employee receives Statutory Parental Bereavement Pay. One-off costs will include familiarisation with the change. There are not expected to be any continuing costs.
Customer experience is expected to stay broadly the same as there is no significant change to business processes.
There is expected to be no impact on civil society organisations.
Operational impact (£m) (HMRC or other)
There are no operational impact costs of delivering this policy.
Other impacts
Other impacts have been considered and none has been identified.
Monitoring and evaluation
The policy will be kept under review through communication with affected taxpayer groups.
Further advice
If you have any questions about this change, please contact the employment income policy team by email: employmentincome.policy@hmrc.gov.uk.