Important Information re: Salary Sacrifice Schemes following the changes in the Autumn Statement

What does the Autumn Statement mean for employee benefits?

On 23 November, Chancellor Philip Hammond delivered his 2016 Autumn statement, and with it, significant changes to the future of employee benefits. He announced that the tax and employer National Insurance (NI) advantages of salary sacrifice schemes will be removed from April 2017.

The reform will apply to ‘arrangements’ where the employee gives up part of their salary in exchange for a Benefit in Kind (BiK), including salary sacrifice arrangements.

Employees will lose their tax benefits but retain their NI savings for the affected schemes, and Grandfather Rights will apply to contracts already in place.

Put simply, if an employee is in an affected scheme before 6 April 2017, their contract is protected and they’ll continue to benefit from tax savings up until…….

1.  an end, change, modification or renewal of the contract; or

2.  6 April 2018 (except for cars with emissions above 75g CO2 per km, when the final date is 6 April 2021).

After this point the employee will lose the previously protected tax benefits (but not the NI savings).

Which schemes won't be affected?
The good news is that many of the salary sacrifice schemes are not changing, including arrangements relating to:
What happens if someone is still in a scheme when Grandfather rights expire?

Grandfather rights will expire on 6 April 2018 (except for cars with emissions above 75g CO2 per km, when the final date is 6 April 2021).

After this point the employee will lose the previously protected tax benefits (but not the NI savings).

For example, an employee who entered into a 3-year computer scheme at some point after 6 April 2015 will lose their tax benefits from 6 April 2018.

Lease cars information from Fleet Solutions

Salary Sacrifice continues with minimal impact

Following a review by the treasury, the Chancellor has confirmed that lease car salary sacrifice schemes will continue beyond April 2017 and that all cars will still be available to lease with only a very small percentage affected by changes in the way they are taxed.

These changes are set out below;

Existing agreements

HMRC have confirmed that any vehicle currently on the road will not be affected in any way.

Ultra Low Emissions Vehicles (ULEVs)

Any vehicle with an emissions figure of less than 75 g/km will not be subject to any change going forward. These vehicles include; Nissan Leaf, BMW 330e, Mercedes C350e, Tesla, VW Golf GTE, Mitsibushi Outlander PHEV etc.

All other cars

Any vehicle ordered prior to 6th April 2017 will be unaffected for its full contract term (Please see further notes below).

All vehicles that are ordered after 6th April 2017 will need to be subject to the new taxation rules. The new rules mean that a calculation needs to be performed at the quotation stage to calculate the drivers benefit in kind (BIK) as the higher of the gross salary sacrifice or the traditional taxable benefit calculation. This will have an effect on a very small percentage of cars, almost exclusively at the lower end of the price scale and will typically mean an increase in tax of less than £20 per month for an affected car ordered after 6th April 2017.

Fleet solutions systems will be updated in due course to reflect these new rules.

Please see below for a list of FAQ’s, if any member of staff would like to discuss the changes in more detail, please contact NHS Fleet Solutions on 0344 8118228.

FAQ’s

Is the scheme abolished?

No – the scheme has been endorsed by the Chancellor and will continue with some minor amendments to the taxation of certain cars.

Can I end the contract early on my current car so I can order a new car before April to stay in the scheme for another 3 years?

No – you cannot exit a salary sacrifice scheme early unless you can demonstrate a relevant lifestyle change.

Will my costs differ from my signed contract?

If you enter into an agreement in advance of 6th April 2017, your quoted price will not vary because of the changes announced in the Autumn Statement. The agreed gross salary sacrifice will not change, however the net impact is subject to variation if the rates of pension, NI and tax are changed during the course of the agreement.

Will the price of my current car go up?

No

Can I order my car now forJanuary 2019?

No – the new rules will allow for a normal lead time of 12 – 16 weeks, but you cannot order a car for a timeframe too far in advance.

Which cars would be affected?

The affected agreements are those when the gross monthly salary sacrifice is greater than the monthly taxable benefit using the current calculation. It is impossible to provide a list of cars which will be affected, as there are many factors that determine the level of gross salary sacrifice; however the smallest cars are the ones more likely to be affected.

Will my price increase in April even if I sign a new agreement now?

Any agreement entered into prior to 6th April 2017 will be protected until 5th April 2021, so longer than the contract term.

What if the cost changes significantly and I can no longer afford this?

The cost will not change as a result of the new rules if you have a car on the road or on order prior to 6th April 2017.

What happens if I order my car after the 6th of April 2017?

Our quotation system will be amended in early March to fall in line with the new rules. Only a small percentage of cars will be affected and if so, the quotation provided will take the revised tax rules into consideration. In practice, the customer will be unaware if the car being quoted for is affected, as they will simply receive a quote which takes into account the actual tax payable.

My car is due to be delivered after 6th April 2017, are my payments going to go up?

Not if the car was ordered prior to this date.

Is the scheme still good value for money?

Yes, the pricing offered via the public sector framework in most cases is favourable compared to pricing available to the general public.