What is a computer salary sacrifice scheme?
This is an arrangement where an employer buys a computer from a computer scheme provider and then loans it to an employee, typically via a flexible or voluntary benefits scheme. The employee repays the cost through their gross pay.
Where can employers get more information?
Information about how computer salary sacrifice schemes work can be found on provider websites. HM Revenue and Customs’ website gives more details on the tax treatment of computers.
Who are the main providers?
Providers include Avinity, Clarkwood Enterprise, Computershare Salary Extras, Computingscheme, Employee Choice, Exertis Employee Benefits, Let’s Connect, P&MM Employee Benefits, Stormfront and Tech Benefits.
Computer salary sacrifice schemes offer employees the opportunity to buy a computer through their employer. The main attraction of these schemes for employees is that they can pay for their chosen tech gadget out of their gross pay and spread the cost of the computing equipment over monthly payments. They can also make tax and national insurance (NI) savings in the process.
Basic-rate taxpayers could expect to save up to 8% of income tax and 12% in NI. Higher-rate tax payers can save 16% and 2%, respectively. Technically, employers own the computers, which they loan to their employees, who are then liable to pay benefit-in-kind tax.
Most scheme providers do not charge for launching a scheme, because they generate profit from selling related accessories and insurance cover, but employees’ orders may be subject to administration and delivery fees.
Some employers choose to offer computers to staff via a straightforward discount scheme, rather than through a salary sacrifice arrangement. Although there are no tax and NI savings, these arrangements allow for shorter repayment periods and open up the benefit to low-paid workers who cannot participate in salary sacrifice.
As with all benefit programmes, computer salary sacrifice schemes need to be communicated effectively to ensure staff understand the impact the benefit has on their take-home pay, the tax treatment and benefit-in-kind liability, and how the hire and payment agreement between them and their employer is regulated.
One consideration employers should be aware of is the risk of a salary sacrifice arrangement taking an employee below the national minimum wage. Schemes need to be reviewed whenever changes are made to the national minimum wage, and also for the national living wage, which comes into effect from April 2016.
Employers should also keep track of and communicate market trends, such as the rising popularity of bring-your-own-device (BYOD) schemes, which are rivalling computer salary sacrifice schemes. This is being driven by an increase in flexible-working practices within many organisations.
The major advantage of BYOD schemes for employees is that they purchase and own their computer, which they then use at work, rather than having to loan it from their employer. But a major drawback for employers is IT security, hence why the government updated its BYOD guidance for employers in November 2014.
In addition, in its Spending review and autumn statement 2015 policy paper, the government expressed concern at the growth of salary sacrifice arrangements, and will be gathering evidence to inform its actions going forward.
In the Budget 2016, the government confirmed it is considering limiting the range of benefits that attract relief on tax and national insurance contributions (NICs) when offered via salary sacrifice arrangements.