Vivup Home and Electronics staff benefit

Tax implications

Salary sacrifice schemes

Salary sacrifice is a workplace scheme where you give up some of your earnings each month in return for a non-cash benefit. The council offer a variety of schemes, including the cycle to work scheme, Vivup Home and Electronics and the Tusker Car Lease scheme. The tax and National Insurance advantages vary dependent on which scheme you use.

Taxable assets

When you order products through the Vivup Home and Electronic salary sacrifice scheme, these are initially paid for by Lancashire County Council. This means that they are classed as assets by HMRC.

Employees repay the council via a salary sacrifice arrangement over either 12 or 24 months and monthly repayments are deducted from the employee's gross salary (the amount before tax and NI is deducted).

Repayments

The monthly repayments are deducted before tax, NI and Pension are calculated so no tax, NI or Pension is calculated on this amount. This results in an initial saving of these deductions to the employee. 

Tax implications

The non-cash benefit (the product purchased) is an asset and therefore tax is applied to the whole cost of the item when purchased in accordance with HMRC regulations. This is reported to HMRC on a P11D in July following the end of the tax year that the purchase was made in.  You will need to pay the tax on the non-cash benefit (purchased product) to HMRC. The amount due will vary dependent on the value of the item/items and your personal tax allowance.

Collection of tax

HMRC will calculate the amount of tax due and where possible, adjust the individual's tax code in order to collect the tax. This may happen in the same year as the purchase was made and is controlled by HMRC internal processes.

The saving to the employee in respect of NI and pension remain; the amount of tax due is calculated at the same rate as if the non-cash benefit had been paid as a cash salary.

Contacting HM Revenue and Customs (HMRC)

You can speak to HMRC further about the collection of tax by calling 0300 200 3300 or visiting their website. You can also set up your personal tax account to check your records and manage your details.