NIC on slaray sacrifice?

[Lee Young]

I think I know the anwser to this one, but I thought I would double check with the proper experts.

If an employee owes his employer say 1000 pounds by way of loan made to the employee and the employee takes a salary reduction rather than repaying the loan, am I right in thinking there is still income tax and NIC on the 1000 pounds salary foregone? Or is there a tax saving for employer or employee in taking the offer of a sacrifice?

[RAL]

Hi Lee

This would be a cash benefits provided via salary sacrifice, hence it is subject to paye and nic. This has to go through the payroll pay class 1 and tax on it.

http://www.hmrc.gov.uk/manuals/eimanual/EIM26116.htm

http://www.hmrc.gov.uk/manuals/nimmanual/nim02210.htm

I am afraid you can not simply write off loan against salary sacrifice benefits!.

HTH

[Lee Young]

Thanks - that was my instinctive reaction but tax isnt always instinctive.....