HMRC published a consultation that explored the potential impacts on employers and employees, should the Government decide to change the way the benefits code applies when a benefit in kind (BiK) is provided in conjunction with a salary sacrifice or flexible benefit scheme. These proposals form the main body of a move to limit the range of BiKs that attract income tax and National Insurance Contributions (NICs) advantages when they are provided as part of salary sacrifice and flexible benefit arrangements.

Crucially, Payroll Giving will not be affected by this change. Where an employer offers Payroll Giving, the employee is able to donate to a charity of their choice from their salary before income tax is deducted. There is no corresponding NIC relief for the employer or employee. The Government is aware that some schemes operate through salary sacrifice arrangements to access the NICs relief that would not otherwise be due. The government is therefore considering that in these circumstances both employer and employee NICs should be applied.

This consultation has now closed. In December 2016 the Government published a summary of responses document. As announced at Autumn Statement 2016 the tax and employer National Insurance advantages of salary sacrifice schemes will be removed from April 2017, except for arrangements relating to employer-provided pensions (including advice), childcare, Cycle to Work and ultra-low emissions cars. Arrangements in place before April 2017 will be protected until April 2018; cars, accommodation and school fees will be protected until April 2021.