Tax Disputes & Investigations

Remuneration Planning (Salary Sacrifice & Shares Schemes)

In challenging economic times, it's often difficult for businesses to find cash to reward staff. Pay rises are often unaffordable and employers risk of losing key members of staff who are vital to growing the business in the future.

Employers can, however, improve the value of their employees' pay packets in a low-cost and tax efficient manner through salary sacrifice arrangements. In addition, small to medium sized companies can use simple share schemes to deliver lower-tax rewards, which not only incentivise key employees, but also help ensure their loyalty (by deferring those rewards by up to five years).

Salary Sacrifice

Salary Sacrifice arrangements allow employees to pay for certain benefits 'tax free' instead of them either being charged to Income Tax, National Insurance or both. Employees agree to give up a proportion of salary (usually for a minimum of twelve months) and, in return, their employer uses the money to provide a benefit to the employee. Typical salary sacrifice benefits include: -

• Contributions to a pension scheme;
• Mobile telephones, including iPhones;
• Free car parking at or near the place of work;
• Bicycles for use in commuting to work; and
• Purchasing additional annual leave.

As the costs of paying for these benefits are paid from gross not net pay, this typically leads to an 'employee saving' of over 30%. The employer 'saves' having to pay any National Insurance, which means that salary sacrifice not only delivers more value to staff, but also saves the employer money!

Larger businesses can also provide staff with taxable benefits via salary sacrifice arrangements, as the savings that can be negotiated by buying in bulk will often outweigh any residual tax charge.

Share Plans and Arrangements

HM Revenue & Customs (HMRC) approve a range of different schemes which deliver tax-efficient rewards to employees. The size and structure of the business will determine which scheme is best, but most schemes do require a wait of between three and five years to gain the best tax treatment. These schemes can particularly help businesses to retain and incentivise the key employees who are responsible for delivering success and growth.

The advantages of share plan arrangements include: -

• The grant of options rather than shares means no dilution of ownership;
• PAYE/NIC is deferred until the option is exercised and typically then only charged on the value at the date of grant (less any amounts paid by the employee);
• Any employer NIC that might be due is typically paid by the employee;
• Any growth in the value of the options is taxed as a capital gain rather than income and is free of National Insurance. Capital Gains Tax rates are often lower than Income Tax rates for the key employees and they are also able to use their annual Capital Gains Tax exemption to mitigate the potential amounts chargeable to tax;
• The schemes are flexible and can be terminated early if the employee leaves;
• The schemes can require the shares to be sold to a particular party after the options are exercised meaning no new or unwanted external shareholders;
• Tax relief is available to the business upon the granting of an option and on the funds used to purchase the shares after an option is exercised; and
• If set up in conjunction with an Employee Benefit Trust, this acts as a market for shares.

How can OneE TDI help?

At the core of OneE TDI is a highly experienced team specialising in all areas of tax disputes and investigations work. We offer confidential, non-judgemental advice to best defend our clients and have a proven track record in successfully managing all contentious tax matters. We have successfully advised numerous businesses on the most appropriate and effective ways of planning remuneration for employees, salary sacrifice and share plan arrangements. We provide a comprehensive service to accountancy and legal practitioners and their clients. Our advice saves our clients time and money and helps reduce their potential exposure to tax, interest and penalties.

Putting it simply, we take control of and manage all issues relating to planning remuneration for employees, salary sacrifice and share plan arrangements so you can get on with your life and your business. What price peace of mind?

Please see the Testimonials kindly provided by our clients (or their accountants or lawyers), which confirm our levels of client service.

How can I contact OneE TDI?

If you would like a free, no obligation discussion with us, please contact either Gary Rowson or Mark Taylor on 0800 652 6156 or complete and submit the online form below.

Whilst we endeavour to provide informative and accurate information, the content on this site is for general information purposes only and should not be taken to constitute tax or legal advice which must always be tailored to individual circumstances. Please contact us if you would like to discuss matters.

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