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HMRC internal manual

Employment Income Manual

Salary sacrifice: request to HMRC to approve arrangements after implementation

Section 62 ITEPA 2003

For an explanation of what a salary sacrifice is see EIM42750.

HMRC does not give advice on salary sacrifice arrangements before they have been implemented. (see EIM42772)

There is no requirement for employers to inform HMRC that they have adopted a salary sacrifice arrangement. However, many employers will do so for reassurance that they are accounting for the correct amount of income tax and NIC. HMRC may agree that changes to employment terms and conditions affect the employees’ entitlement to earnings for tax and NICs purposes. Agreement is given on the understanding that it will cease to apply if there are further changes to the contract.

Sight of the following documents should establish whether the salary sacrifice is effective. See EIM42769 and EIM42770 for information on the relevance of these documents.

  • the contract variation for one employee who has agreed to the changes. If the employer is introducing a number of options for employees, then the contract variation for each different option. (See EIM42753)
  • the original contract of employment if it is not clear what are the terms and conditions of the employment
  • a payslip before and after the variation (See EIM42770)
  • the agreement between the employer and the benefit (or voucher) provider
  • if the benefit involves pension contributions then information on the pension scheme including whether it is registered and if so its pension scheme tax reference number at CAR Pensions Schemes Services
  • all other documents relevant to the scheme, for example any booklet issued to the staff as a full guide to the scheme

If the employer informs you that arrangements have been approved by HMRC in respect of another employer you should request:

  • information and sight of the relevant documents explaining why it is considered that the same arrangements have been approved and
  • confirmation that the arrangements implemented by the other employer are identical.