New ‘special rules’ will shortly impact on the filing of P11D returns.
The 2017/18 tax year will be the first tax year where the value and types of benefits that employers report on their 2017/18 forms P11D and P11D(b) can be affected by the introduction of ‘special rules’ to determine the amount of a benefit which is treated as earnings from the employment where the benefit is provided as part of an optional remuneration arrangement. Optional remuneration arrangements (salary sacrifice) is where an employee gives up the right, or future right, to salary or the right to some other form of cash remuneration in return for the benefit.
Where a salary sacrifice arrangement existed before 6 April 2017 the benefit calculation can continue as before unless the arrangement was varied, renewed or modified (with exemptions for statutory sick pay, maternity, paternity, adoption or shared parental pay).
It is recognised that a number of pre-6 April schemes will have been varied, renewed or modified and a large number of the existing arrangements set up before 6 April 2017 will automatically be subject to the new rules from 6 April 2018. HMRC provide the following simple illustration in its guidance:
‘An employer operates a flexible benefits scheme under which employees give up the right to receive salary in return for free car parking near their workplace. Employees have to sign up for 12 months’ car parking. An employee enters into a 12-month salary sacrifice arrangement starting on 1 January 2017. The benefit will continue to be exempt until the contract comes to an end on 31 December 2017. The contract starting on 1 January 2018 will fall within the new rules.’