VAT on salary sacrifice schemes

Due to a recent European Court of Justice ruling, HMRC now consider that the provision of a benefit via salary sacrifice to employees constitutes a supply of services for consideration and is therefore subject to VAT.

Benefits that will be affected include:

* Cycle to work schemes.
* Face value vouchers.
* Childcare vouchers.
* Food and catering provided by employers.

To give employers time to make the necessary changes to their record keeping HMRC will not require output tax to be accounted for on salary sacrifice supplies until 1 January 2012.

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