EIM42769 - Salary sacrifice: conditions for
successful salary sacrifice: effectiveness of contractual
arrangement
Section 62 ITEPA 2003
For a summary of the conditions that have to be met for a
successful salary sacrifice see
EIM42760.
The following aspects should be considered when deciding if
the scheme is effective
- what is the date of the change in the
remuneration package? Changes cannot be retrospective, (See
EIM42765)
- has the employee’s contractual
entitlement to cash been reduced and replaced with a benefit? (See
EIM42766)
- is there the right within the contract to
return to the original remuneration package? What conditions, if
any, have to be met in order to return to the original remuneration
package? (See
EIM42767).
- Is the benefit exempt from charge to
income tax or just exempt under the benefits code? (See
EIM42755).
- does the provided benefit satisfy the
conditions for exemption from tax and/or NIC? (See
EIM42770).
- has the scheme been implemented? (See
EIM42770).
- is the correct amount of tax and NIC being
accounted for?
- The National Minimum Wage (NMW) is a
consideration, as the cash wage should not fall below a set figure.
Apart from living accommodation, benefits in kind do not count
towards the national minimum wage. It makes no difference whether
or not the benefit is taxed.
