As had been expected HMRC have
announced a clarification of the rules on two popular salary sacrifice schemes: cycle to work and bus passes.
Cycle to work schemes
HMRC will no longer accept that the tax exemption is applicable where certain employees within the organisation cannot participate in a cycle to work scheme because:
- they are aged under 18 and therefore there are restrictions on them signing a credit sale agreement as part of the cycle to work scheme unless an adult acts as a guarantor
- they are paid at the level of the National Minimum Wage so could not participate in a salary sacrifice
The recent
DfT guidance and the
HMRC new guidance indicates how employers can ensure that a cycle to work scheme can still comply with the rules in order to obtain the tax exemption for their scheme for example by varying the type of bicycle on offer such that more expensive cycles are available via salary sacrifice and a pool of bicycles is available to loan to employees who cannot participate in a sacrifice arrangement.
Bus passes
In order for the
tax exemption for subsidy of a public bus service to be available the employer must be providing support for a specific bus route or service to enable employees to travel to work, not just a bus pass that provides general subsidised travel. HMRC will take this approach to bus pass salary sacrifice schemes:
- Bus pass agreements entered into by 18 December 2009 can continue without any amendment to scheme rules as long as the pass is valid for no longer than 12 months effective from 6 April 2010 at the latest
- Any renewals or new agreements after 18 December must meet the conditions of the exemption
Where the exemption is lost the benefit will be taxable and subject to Class 1A NICs via the P11D.
Free Download
printer friendly version