CIPD Reward Forum: HMRC scrutinises salary sacrifice on staff canteens

HM Revenue and Customs (HMRC) is continuing to look very closely at the way employers use salary sacrifice in relation to onsite meals for staff.
Speaking at the CIPD Reward Forum, David Reilly, client services director, Grant Thornton said that HMRC is looking particularly closely at Giro-style cards where employers put ‘money’s worth’ on the cards.
This follows reports of HMRC sending letters to several employers and their tax advisers in January 2008 warning them that the schemes may not be offering employees an effective salary sacrifice because participating staff members retain too much control over how the tax-free cash is being spent. (see also Revenue clamps down on salary sacrifice on-site meals)
Reilly advised employers that applying salary sacrifice to benefits that staff already use makes sense. “But just adding benefits [because of the tax break]is not a good idea because it adds to the [employers’] cost.”
He strongly advised employers to check the legal and tax implications of salary sacrifice very carefully before launching a plan.
“If you are providing tax free benefits unsurprisingly there are a lot of conditions attached. The Revenue is very black and white; if you get one thing wrong it won’t be happy.”
He reminded employers of a little used benefit that has a reduced tax cost – that of offering staff the employers own products and services (if valued by staff).
“There is a nice little twist there that you only have to take into account the marginal cost and not the market cost [of the product or service offered to staff].”