Employers who offer workers childcare vouchers and the like will face some complicated tax calculations from the start of next year when new VAT rules on salary sacrifice schemes come into force.
From January 1 2012, companies will have to pay VAT on non-cash goods and services provided to employees in exchange for some of their salary, HM Revenue & Customs announced in August.
Although childcare vouchers will not be subject to VAT, employers that use an agency to run their salary sacrifice scheme will have to pay VAT on the "administration fee".
Tim Good in the November episode of TaxTV, which explains the main changes in tax rules for salary sacrifice schemes, said: "The employer will need to do an incredibly complicated calculation to discover what the VAT tax would be on their administration fee."
The change to the VAT treatment of salary sacrifice schemes, which often include such as bikes, childcare vouchers, and high street shopping vouchers, follows a ruling last year by the European Court of Justice over a tax dispute between AstraZeneca UK and HMRC (Case C-40/09).
