VAT on salary sacrifice

Just over a year ago, the European Court of Justice (ECJ) decided that salary sacrificed by employees of Astra Zeneca, in exchange for retail vouchers provided by their employer, was consideration for VAT purposes. In its recently published Revenue &Customs Brief 28/11, HMRC state that, in relation to all benefits affected (not just vouchers), VAT should be accounted for on amounts of salary sacrificed with effect from 1 January 2012. Employers therefore have limited time to consider which benefits are affected and whether they would want to bear this additional cost or, if not, how the terms of existing and new sacrifice arrangements should be amended.