Section 118B Revenue approved salary sacrifice agreements
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Amendments
Section 118B inserted by Finance Act 2008 section 21 for 2008 and later tax years.
Salary Sacrifice: Tax Briefing Issue 70 - 2008
(1) In this section—
"approved transport provider" has the same meaning as in section 118(5A);
"exempt employee benefit" means a benefit specifically approved by the Revenue Commissioners which is referred to in subsection (2)(a)(i) and (ii);
["salary sacrifice arrangement"]1 means any arrangement under which an employee forgoes the right to receive any part of his or her remuneration due under his or her terms or contract of employment, and in return his or her employer agrees to provide him or her with a benefit;
"approved profit sharing scheme" shall be construed in accordance with section 510.
Amendments
1 Substituted by Finance (No. 2) Act 2008 section 7(1)(b)(i) as respects expense incurred on or after 1 January 2009.
(2)(a) The amount of the remuneration forgone under any salary sacrifice arrangement specifically approved by the Revenue Commissioners in relation to—
(i) travel passes issued by an approved transport provider under section 118(5A), ...1
(ii) shares appropriated to employees and directors under an approved profit sharing scheme within the meaning of Chapter 1 of Part 17, which are exempt from a charge to tax by virtue of [section 510(4), and]2
[(iii) a bicycle or bicycle safety equipment provided to a director or employee and which is exempt from a charge to tax by virtue of section 118(5G),]3
shall be exempt from tax.
(b) Any amount of remuneration forgone by an individual under any salary sacrifice arrangement and not exempt from tax by virtue of paragraph (a) shall be deemed to be an emolument of the individual and income tax shall be chargeable accordingly.
Amendments
1 Deleted by Finance (No. 2) Act 2008 section 7(1)(b)(ii)(I) as respects expense incurred on or after 1 January 2009.
2 Substituted by Finance (No. 2) Act 2008 section 7(1)(b)(ii)(I) as respects expense incurred on or after 1 January 2009.
3 Inserted by Finance (No. 2) Act 2008 section 7(1)(b)(ii)(II) as respects expense incurred on or after 1 January 2009.
(3) Where an exempt employee benefit is provided to the spouse or dependant of, or a person connected with, the individual, being an individual who has entered into a salary sacrifice arrangement, then any such benefit shall be deemed to be an emolument of the individual and income tax shall be chargeable accordingly.
(4) Where—
(a) but for this subsection, subsection (2)(a) would apply, and
(b) there is an arrangement or scheme in place whereby the employee is recompensed, wholly or partly, by the provision of an exempt employee benefit together with a compensating payment,
then the provisions of subsection (2)(a) shall not apply and the remuneration foregone shall be treated as an emolument of the individual and income tax shall be chargeable accordingly.
Am I caught for PAYE if I am part of a scheme which provides me with an exempt employee benefit and a compensating payment?
(4) Yes. If a scheme exists to provide you with an exempt employee benefit within (2)(a), together with a compensating payment, the benefit is no longer exempt, and is caught for PAYE.
(5) Where a [salary sacrifice arrangement]1 is entered into in respect of any right, bonus, commission or any other emolument which arises to an individual after the end of the year of assessment, then subsection (2)(a) shall not apply and the remuneration foregone shall be treated as an emolument of the individual for that year and income tax shall be chargeable accordingly.
Amendments
1 Substituted by Finance (No. 2) Act 2008 section 7(1)(b)(iii) as respects expense incurred on or after 1 January 2009.
(6) This section has effect as on and from 31 January 2008.
