MEMBERSHIP INSIGHT
On your behalf
Policy team update
Diana Bruce MCIPPdip, CIPP senior policy liaison officer, provides an update on OpRA and HMRC’s EPG consultation forum
Optional remuneration arrangements
accommodation. For the purposes of the benefits code, a benefit is provided under an OpRA if it is provided under an arrangement of either type A or B; so, it isn’t just salary sacrifice that is captured. The benefits code has been revised so that the employee is taxed on whichever value is the higher of the cash or the benefit. However, where an employee receives, say, a car allowance but there is no option to receive a company car, the employee is taxed on the car allowance; cash is cash, and you process as you would have pre- April 2017. There are four specific exemptions where the rules haven’t changed: ● pensions ● childcare ● cycle to work ● ultra-low emission vehicles. These are the politically astute exceptions so employees get to keep the tax and NICs breaks on those. Transitional provisions (also known as ‘grandfathering’) were brought in for arrangements in place before 6 April 2017, which means the new rules for
these arrangements will take effect from 6 April 2018 for all benefits except cars with CO2 emissions of 76 grams per kilometre and above, employer-provided living accommodation, and school fees. The old rules will continue to apply for these three types of benefit until 6 April 2021. Payrolling A few months ago, we were made aware of an issue regarding OpRAs when combined with voluntary payrolling. This emerged during a HM Revenue & Customs (HMRC) webinar for agents on employee expenses and benefits. The presenter simply stated that benefits provided via an OpRA could not be payrolled from 6 April 2017, even if the employer was registered to do so, and the benefits had been payrolled for the previous year. Research uncovered that this was due to defects in the legislation that introduced payrolling. The law does not refer to the appropriate calculation, introduced from 6 April 2017, for some benefits and some individuals who receive BiKs from their employer via type A or type B OpRAs. Because of the glitch in the regulations, employers who were payrolling benefits covered by OpRA were still required to submit a P11D return, which of course defeats one of the benefits of voluntary payrolling – i.e. no P11D submission.
The legislation on optional remuneration arrangements (OpRA), which came into effect from 6 April 2017, is essentially the government’s way of trying to remove some of the previous tax and National Insurance contributions (NICs) breaks which came about when salary sacrifice was used to pay for benefits in kind (BiKs). Although the legislation has been in place since April there are still payroll professionals among us who do not think the changes apply to them as they don’t operate salary sacrifice schemes. If this applies to you, please read on because, although salary sacrifice is very much still with us, there are two types of ‘arrangement’ that come under OpRA legislation: ● Type A – this is where an employee gives up cash earnings in exchange for a BiK, which is what employers have regarded as typical salary sacrifices ● Type B – this is where an employee chooses a benefit rather than a cash allowance, such as a car or living
...the new rules for these arrangements will take effect from 6 April 2018...
| Professional in Payroll, Pensions and Reward | November 2017 | Issue 35 4
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