Many employers have introduced flexible benefit plans for their
employees. Broadly speaking, employees are given the opportunity to
choose the benefits in kind they would like to receive from a menu
of possibilities. Many schemes give each benefit a monetary value
which usually bears no particular relationship to its taxable value
under the benefits code (see
EIM21101). Benefits in kind which may be
included in such schemes include company cars, childcare provision,
private health insurance, additional pension contributions, and
even additional days annual holiday.
You may be asked to advise on the tax implications of these
schemes. Requests are usually received at the time when the
employer introduces the scheme, when they often involve an element
of "salary sacrifice". In other words, the employee gives up some
part of his or her original gross pay in return for additional
benefits in kind.
Bear in mind that this is not an area where the Inland
Revenue is obliged to give any kind of clearance, or
pre-transaction ruling. Employers and employees are free to enter
into whatever agreements they wish. No doubt they will obtain
appropriate professional advice before doing so.
But you can only express an opinion on the tax effect of
such a scheme once it has been put in place.
Subject to that, in considering these schemes you should
concentrate on two main areas:
Many of these schemes include references to a "benefit allowance", "flex fund" or "flex account". You will find guidance on this aspect at EIM01143.
