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HMRC internal manual

Employment Income Manual

From
HM Revenue & Customs
Updated
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Salary sacrifice: other points to consider: application of the tax/NIC exemption

Tax/NICs exemptions on non-cash benefits

Some non-cash benefits qualify for an exemption from tax and/or may be disregarded before calculating NICs. If this is the case for a benefit provided to an employee as part of a salary sacrifice arrangement, all conditions that apply to the exemption must be satisfied.

For example, some exemptions require that the provision of the benefit is made available to all employees. This condition must be fully satisfied, whether or not all employees are able to participate in a salary sacrifice arrangement.

Employees whose salary is equal to or only slightly greater than the National Minimum Wage may not be able to participate in a salary sacrifice arrangement because a salary sacrifice arrangement cannot reduce an employee’s cash earnings below the NMW. If the provision of a benefit is only offered to employees who enter into a salary sacrifice agreement and so that benefit is not made available to any employees who cannot then that exemption will not apply.

This consideration does not apply to the exemptions relating to the provision of childcare vouchers or directly contracted childcare.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)