Salary sacrifice (optional remuneration arrangements)

What is a salary sacrifice arrangement?

Following implementation of the Finance Act 2017 (FA 2017), from 6 April 2017, only salary sacrifice arrangements relating to contributions to registered pension arrangements, pensions advice, employer-supported childcare, cycle to work and ultra-low emission cars continue to benefit from beneficial tax and/or National Insurance contribution (NIC) arrangements. Therefore, unless the salary sacrifice relates to one of these special cases (or relates to an otherwise tax-exempt benefit) swapping salary for benefits under a salary sacrifice scheme will, subject to transitional arrangements, face a taxable value of the higher of the amount of cash remuneration given up, and the taxable value under the benefit in kind rules.

The rules introduced by FA 2017 refer to ‘optional remuneration’ arrangements (OpRA). These are wider than the traditional salary sacrifice arrangements outlined above, and include any future arrangements where employees agree to be provided with a benefit rather than the salary equivalent. Broadly speaking, where an employee has an option to receive cash or benefits, the new rules may be in point. For more details, see Practice Notes: Optional remuneration arrangements and