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HMRC internal manual

Employment Income Manual

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HM Revenue & Customs
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Particular benefits: canteen arrangements: examples of changes to remuneration package

Section 317 ITEPA 2003 as amended by section 60 FA 2010

With effect from 6 April 2011, there is an additional condition which must be satisfied in order for the exemption in section 317 ITEPA 2003 for employer-provided free and subsidised meals to apply. This condition is that the meals must not be provided in connection with relevant salary sacrifice or flexible remuneration arrangements (see EIM21676).

Employers that operate from more than one site may have different pay structures at different sites as a consequence of regional pay variations and also other factors such as the availability of subsidised meal facilities. It is therefore possible that an employee’s cash salary may be reduced on moving from one location to another location. The following examples illustrate scenarios in which any change in the remuneration structure is merely a consequence of the change in location and does not fall within the meaning of relevant salary sacrifice or flexible remuneration arrangements.

Example 1

An employee works for a large national employer at an office in central London and earns a salary of £40,000 a year. There are no catering facilities on the employer’s premises. The employee relocates to an office 150 miles from London. The employee has the same duties and job title at the new location but now earns £35,000 a year in common with other staff performing similar duties at that location and also has access to a cheap, employer-subsidised canteen. The employee volunteered for the transfer but, having so volunteered, had no option to be paid more than £35,000 a year and to receive less in the way of subsidised canteen benefit.

The change in the employee’s remuneration package does not fall within the meaning of relevant salary sacrifice or flexible remuneration arrangements.

Example 2

A large national employer has three offices in London. At two of the offices there is no access to subsidised catering facilities. At the third office, there is a cheap staff canteen and all staff who work at the third office are paid a lower cash salary than colleagues doing equivalent work in the other two offices. Employees are not offered a choice about which office they work in: they are assigned to an office depending on the business division in which they work.

The reduced salary and provision of subsidised meal facilities is an inevitable consequence of the employee being assigned to a particular office and the fact that employees would have been paid more had the employer assigned them to a different London office does not bring the remuneration package does not fall within the meaning of relevant salary sacrifice or flexible remuneration arrangements.