.png)
.png)
HMRC have provided further guidance to assist businesses with the implementation of changes to VAT accounting in relation to salary sacrifice arrangements announced in Revenue and Customs Brief (RCB) 28/11.
RCB 36/11 explains that for salary sacrifice agreements made on or before 27 July 2011 and which extend beyond 31 December 2011, HMRC will allow amounts of salary foregone in return for taxable benefits to continue to be free of VAT until:
- the date a fixed term agreement expires or the fixed number of salary sacrifice payments specified within the agreement are completed;
- the date of an employee’s annual salary/benefits review; or
- the date of any other review or renegotiation that leads to a change in the provision of benefits under a salary sacrifice agreement, or to a change in an employment contract.
Following one of the above events, VAT will be due on taxable benefits provided on or after 1 January 2012, by way of salary sacrifice.
For agreements entered into on or after 28 July 2011, VAT must be accounted for in accordance with the guidance in RCB 28/11.
With effect from 1 January 2012, VAT will be due on amounts of salary foregone in return for taxable benefits.
