Budget 2011: Disguised remuneration rules could include car salary sacrifice

Chancellor George Osborne has confirmed that the government will introduce legislation to target arrangements intended to disguise remuneration or avoid restrictions on pensions tax relief.

It has not yet clarified whether this will include salary sacrifice car schemes.

Alastair Kendrick, director of employment tax services at Mazars, said: “There is a commitment that disguised remuneration is not deemed to cover employee car ownership schemes.

“But it [the government] is silent on whether it will deem disguised remuneration, which is going to come in April, to include salary sacrifice on company cars.

“We have to wait until the draft legislation, which is expected on 30 March, for clarification on that.”

HM Revenue and Customs (HMRC) published a list of frequently asked questions (FAQ) in February 2011, that stated: “We would accept that on its own, sacrificing salary in favour of provision of tax‐exempt or tax‐advantaged benefits does not constitute tax avoidance.

“However, we would not rule out the possibility that particular salary sacrifice arrangements could involve tax avoidance so we cannot say there is never a tax-avoidance purpose in the context of salary sacrifice arrangements.”

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