In our newsletter on 15 June 2017 we outlined the new rules concerning the valuation of benefits provided by way of a salary sacrifice, which apply from 6 April 2017. HMRC refer to these arrangements as operational remuneration arrangements (OpRA).
It is important to understand that there are now two methods of valuing benefits in kind: the normal rules which applied up to 5 April 2016 (eg: tax exempt, statutory rates or cost to employer), and where the employee has actively given up some salary in order to receive the benefit – the OpRA valuation rules apply. Thus, two employees who receive exactly the benefit in 2017/18 could be taxed on different amounts, where one person gave up salary in return for the benefit and the other person did not.
This is further complicated by the fact that some benefits are grandfathered into the OpRa system; such as cars, school fees and accommodation. The old rules will apply to those benefits, even if salary was sacrificed, where the arrangement was in force at 6 April 2017, until at least 5 April 2018.
HMRC has amended its guide to expenses and benefits (leaflet 480), to include the OpRA rules at appendix 12. They are worth reading in detail.
For more information contact DFC accountants in Cardiff, Wales.