Taxes Consolidation Act 1997 section 118B

Revenue approved salary sacrifice agreements

Section 118B sets out the tax rules governing salary sacrifice arrangements, confirming that such arrangements are generally ineffective for tax purposes unless the salary is sacrificed for one of a limited number of Revenue-approved exempt benefits.

• A salary sacrifice arrangement is where an employee gives up part of their contractual remuneration in return for a benefit from their employer; unless one of three specific exemptions applies, the employee remains taxable on the full salary forgone.
• The three exempt benefits are: travel passes from approved transport providers, shares appropriated under an approved profit sharing scheme, and bicycles or bicycle safety equipment — where salary is sacrificed for one of these, no tax charge arises on the amount forgone.
• The exemption is lost where the benefit is provided to a spouse, civil partner, dependant, or connected person rather than the employee, or where the employee receives a compensating payment alongside the exempt benefit.
• Salary sacrifice cannot be applied to bonuses, commissions, or other emoluments that arise after the end of the year of assessment; such amounts remain fully taxable as emoluments.