Fleet News

Court casts doubt over salary sacrifice

A recent European Court of Justice ruling has raised fears about the future of salary sacrifice schemes.

It is currently financially advantageous for employees to obtain low emission cars under salary sacrifice schemes thanks to National Insurance and income tax savings.

As a result, many companies offer salary sacrifice for cars schemes to their employees. And a recent trend has been identified (Fleet News August 5) where companies are replacing their company car fleet with one entirely made up of salary sacrifice cars.

But the ECJ ruling in favour of HMRC forcing the defendant - AstraZeneca - to account for VAT on the salary sacrificed by its employees for retail vouchers has raised fears that HMRC will look again at cars supplied through salary sacrifice schemes.

HMRC would not rule this out.

“We are currently considering whether the decision has any wider implications, but cannot comment any further at present,” said an HMRC spokesman.

Such a move would effectively kill off such schemes as it would remove any tax benefit for the employee.

However, the current consensus of expert opinion is that the case will not impact car schemes.

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