From 1st January 2012, employers operating salary sacrifice schemes will need to consider how best to deal with them in the light of the Revenue and Customs recent briefs 28/11 and 36/11 which document a change in the VAT accounting on salary sacrifice schemes.

These briefings follow the decision reached in a recent case where AstraZeneca appeared before the Court of Justice of the European Union (CJEU). Astra Zeneca operated a flexible remuneration package scheme under which employees could opt to take part of their remuneration in the form of goods and/or services rather than as salary. The case concerned the correct VAT treatment of high street shopping vouchers provided to employees as one of the options of the scheme.

The Court found that the provision of vouchers amounted to a supply of services effected for consideration. Consequently, whilst AstraZeneca was able to recover VAT incurred on acquiring the vouchers, output tax was due on the consideration received from its employees. Although this case involved the supply of vouchers to employees, the principles considered by the Court are of general application and will apply to other supplies of goods and services to employees.

In the past, HM Revenue and Customs have differentiated between benefits provided to employees by way of deduction from salary and benefits provided by way of salary sacrifice (where an employee has permanently given up the right to salary in return for goods or services). Businesses did not have to account for VAT in respect of salary sacrifice schemes.

As a consequence of the (CJEU) decision, it is important for employers running salary sacrifice schemes to consider the VAT implications of not only shopping vouchers but other benefits such as the VAT on hire charges of bicycles in ‘cycle to work’ schemes etc. Except for the administration charges paid to the providers of childcare vouchers, the vouchers themselves fall outside of the decision but if you require advice on this complicated area of law, please do not hesitate to contact us at Stripes Solicitors.

Authorised IFA with over 25 years history seeks to acquire FSA licensed IFAs whose business activities include investments and pensions.  Target should have at least 250 clients of whom a minimum of 50% should be active.  Minimum of two RDR qualified staff and target should be RDR ready or close to it.

North West and South East preferred locations.

Ref: DD11 2531

Background: Northern based supplier of products into a niche and very stable sector.  Very high levels of repeat business from an established and loyal customer base.  Purpose-built modern premises and recently installed bespoke computer system. T/o £4.3m, EBITDA £400k

Ref: DA11 5891

Background: Specialists in the installation of suspended ceiling systems, partition walls, dry lining, plastering and screeding.  High margins and profitability, constantly achieved. T/o £12.7m, EBITDA £2.3m

Ref: DA11 5881

Background: Company has approvals and skills for nuclear, oil and gas, transportation and automotive producing bespoke products.

2011 t/o £1.5m, EBITDA £750k

Ref: DA11 5871

Background: Importation and distribution of retail security products based in the south. ExclusiveUKrights for a major manufacture. Retail security display cases, tags/cables.

Ref: DA11 5861