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VAT and salary sacrifice: further guidance

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HMRC has issued further guidance for employers on changes to VAT accounting. Employers will need to account for VAT on the salary foregone by employees in return for vouchers or goods and services from January 2012, HMRC announced on 28 July.

For salary sacrifice agreements entered into on or after that date, VAT must be accounted for in accordance with the guidance in Revenue and Customs Brief 28/11, HMRC said in Revenue & Customs Brief 36/11. The Brief also sets out HMRC’s view of the VAT position for agreements in place before 28 July that extend beyond 31 December.