Government Announces Consultation on Travel Salary Sacrifice Schemes

February 12th 2010

In the 2009 Pre Budget Report, the Government announced that it would shortly be issuing a consultation regarding the use of salary sacrifice respect of travel schemes for employees paid at or near National Minimum Wage levels. These schemes involve employees working for companies who place them in a series of temporary workplaces, which means that they may be entitled to receive travel and subsistence allowances free of tax/NIC instead of part of their normal salary. The concern was that the Government believed these schemes exploited the individuals involved and could affect their benefit entitlements.

The consultation was issued on 11th February 2010 (link available below).  In summary, the Government proposes that subsistence allowances, which are free of tax/NIC, will not count for National Minimum Wage purposes.  As a result, whilst there are no changes being proposed to the rules regarding tax/NIC and travelling, it will not be possible to implement such schemes where the employees’ basic pay is reduced below National Minimum Wage levels. 

If you would like further information then please contact John Harling on 0115 983 5580 or email jharling@edftax@co.uk 

http://www.hm-treasury.gov.uk/consult_minimumwage_expenses.htm