Employers reel from HMRC’s latest questioning of salary sacrifice as tax uncertainty escalates further
Benefits professionals are faced with fresh challenges as they enter 2008 with anticipated changes to tax-efficient benefits and increasing pressure to respond to both environmental concerns and their employer’s social responsibility (CSR) agenda.
Uncertainty around tax-efficient benefits looks set to continue as HM Revenue & Customs (HMRC) has warned employers that schemes that allow staff to sacrifice salary in exchange for workplace meals may not be effective (see page 7). This comes just months after the withdrawal of tax efficiencies around the holiday pay scheme and follows the axing of the home computing initiative. Question marks are also hanging over the tax position of health screening and employee assistance programmes.
HMRC’s turnaround in October on its announcement that health screening may become a taxable benefit unless it is offered on an employer-funded basis to all employees is still causing concern among employers. Gillian Hibberd, corporate director (people and policy) at Buckinghamshire County Council, is worried that the government may push ahead with the tax change. “If it does, I fear that it will result in withdrawal or poor take-up [of health screening],” she said.
A change at the top of HMRC with the temporary appointment of Dave Hartnett in place of ex-chairman Paul Gray, whose high-profile resignation followed the loss of confidential details of 25 million people in receipt of child benefit, has also raised the prospect of a harder line from the tax authorities on the use of salary sacrifice.
Alastair Kendrick, tax partner at Bourne Consulting, said: “[Hartnett] has very strong views about anything that is perceived to be tax aggressive, and I imagine that would include certain elements of salary sacrifice [should he stay in the role].”
This general uncertainty around salary sacrifice and other tax-efficient benefits is making it hard for employers to plan ahead, says Barry Hoffman, head of human resources at Charteris. “It does seem rather mean spirited of the government to introduce schemes that help a wide cross section of the population, for it to remove them once businesses have invested time and effort in promoting them.
“It would be good to get some long-term stability in the salary sacrifice market.”
Other issues facing benefits professionals in 2008 include taking account of the environment and the CSR agenda when developing future benefits strategies. The environment is also having an impact on those managing company cars.
Nigel Trotman, business relationship manager at leisure firm Whitbread, said: “[There is a] delicate balance between offering an attractive car policy, while meeting safety and CO2 objectives.”