HM Revenue and Customs Brief 36/11
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Issued 3 October 2011
VAT: further guidance on the treatment of supplies made by
employers under salary sacrifice arrangements on or after 1 January 2012
1.This brief provides 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
28/11 on 28 July 2011.
2.Salary sacrifice agreements in place before
28 July 2011 which extend beyond 31 December 2011
For salary sacrifice agreements that were signed or otherwise
agreed by the parties on or before 27 July 2011 and which extend beyond
31 December 2011, HM Revenue & Customs (HMRC) will allow
amounts of salary foregone in return for taxable benefits to continue
to be free of VAT until:
- The date that a fixed term agreement expires or the fixed
number of salary sacrifice payments specified within the agreement are
completed (if the agreement expires before 1 January 2012 any agreement
subsequently entered into should follow the VAT treatment described in
section 3 below).
- The date of an employee’s annual salary/benefits review.
HMRC will regard any salary sacrifice arrangements put in place after
that date as a new agreement for VAT purposes which should follow the
treatment described in section 3 below. This will be the case even if
the employee continues to receive the same taxable benefits as before
- 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 any
taxable benefits provided on or after 1 January 2012 by way of salary
3. Salary sacrifice agreements entered into on or after 28
For agreements entered into on or after 28 July 2011 VAT must
be accounted for in accordance with the guidance in Revenue and Customs
Brief 28/11. With effect from 1 January 2012 VAT will be due on amounts
of salary foregone in return for taxable benefits.
For further information and advice contact the VAT Helpline on Tel 0845
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Article Published/Sorted/Amended on Scopulus 2011-10-09 02:30:01 in Tax Articles