With the increasing popularity of canteen facilities being offered to employees through salary sacrifice arrangements, the HMRC has reviewed its position and released new guidance (Income Manual number 21675) on the exemption for subsidised meals and refreshments provided by employers for their employees.
The HMRC has become concerned that employees have too much control over the way in which the sacrificed money is allocated and spent under the arrangements and that such schemes therefore do not conform to the principles outlined in s317 of the Income Taxes Act that allow for the exemption.
As such, the HMRC have been advising employers with such arrangements that any benefits provided under salary sacrifice agreements should be subject to income tax and National Insurance Contributions, which may be applicable retrospectively.
They are many interested parties who are prepared to challenge the decision, however, and so it may not be going the way of the Home Computer Initiative just yet - and one must assume that the Government doesn't want to rile the number of large blue collar employers who offer more traditional subsidised facilities to their staff!
Existing ‘legitimate' arrangements, where the employer continues to provide free or subsidised meals to all employees on a reasonable scale will therefore continue to be exempt.
We will keep you updated on any developments on this issue.
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