Bath employers are being warned to urgently review their payroll practices following a government tax raid on employee benefits.
Since April 6 the government has clamped down on salary sacrifice schemes that reduce gross pay in exchange for benefits such as mobile phones, cars, gym memberships and school fees. 
Bath’s largest accountancy firm Bishop Fleming says that while the new rules are in Finance Act 2017, passed just days before Parliament dissolved for the general election, draft guidance was only made available by the tax office to employers at the end of March, giving them very little time to respond.
Surrendering wages for benefits saves National Insurance for both employers and employees, but the new regime removes this saving and creates a level playing field between those employers who offer benefits through salary sacrifice and those who don't.
Bishop Fleming partner Will Hanbury, pictured, who heads the firm’s payroll bureau, said: “Employers must review their existing payroll and benefits practices in order to comply with the new regime. Any tax savings that were available may now be lost.”
Mr Hanbury points out that some benefits can still be salary sacrificed, such as pensions (including advice), childcare, cycle to work and ultralow (75g/km) emission cars.
He also highlights transitional relief for arrangements already in place before April. They will be protected up to April next year – with arrangements for cars, accommodation and school fees protected up to April 2021.
However, Mr Hanbury warned that where employees now vary or renew their pre-April 2017 arrangements, the transitional relief is lost from the date of variation.
“These changes are likely to be just the start of a tightening up of staff benefits, as the government wants to go further with more tax restrictions in future,” he said.
“Employers have to be clear and competitive in what benefits they offer, so these restrictions mean they have to communicate with staff about the changes, and seek advice on attractive alternatives. Despite the clampdown, there are still benefits that can gain employee tax advantages, such as pensions.”
Bishop Fleming has seven offices across the South West and Midlands including Bath.
