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HMRC internal manual

Tax Credits Technical Manual

From
HM Revenue & Customs
Updated
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Income: Employment income rules: Salary sacrifice

A salary sacrifice happens when an employee gives up the right to receive part of the cash pay due under his or her contract of employment. Usually the sacrifice is made in return for the employer’s agreement to provide the employee with some form of non-cash benefit. The ‘sacrifice’ is achieved by varying the employee’s terms and conditions of employment relating to pay (see EIM 42774)

A salary sacrifice for childcare vouchers or the provision of an employer provided nursery place can reduce the relevant employment income figure for tax credits as the value of these benefits is not included as income. But any childcare costs declared for the childcare element of WTC would be reduced as those costs met by the employer are not relevant costs (see TCTM02630 and TCTM04225)