HMRC to amend its salary sacrifice guidance to prevent a conflict with auto-enrolment
HMRC will amend their guidance on salary sacrifice arrangements with respect to auto-enrolment to permit employees to opt out at any point and obtain a refund of the salary sacrificed.
Salary sacrifice involves an employee giving up a right to part of his salary in exchange for a non-cash benefit which usually enjoys income tax and/or national insurance advantages.
Employees may only terminate salary sacrifice arrangements during a specific review period or on the occurrence of a 'lifestyle event', such as the redundancy of a partner or pregnancy. Without this proposed revision, a scenario may have arisen where employees who were auto-enrolled in a pension scheme subsequently opted out of the scheme and were then not entitled to a refund of the salary sacrificed, between the date of opting out of the pension scheme and the next review period or lifestyle event.
The revision of HMRC’s guidance is to be welcomed. We will provide confirmation of any changes once it has been published.