More than two out of five employers are unaware of the implications of the UK’s new Optional Remuneration Arrangements (OPRA), which came into force earlier this month.
The salary sacrifice tax advantages that have been removed with the new OPRA rules mean that both employers and employees need to be ready for possible tax charges. The changes will impact two of the mainstays of flexible benefit arrangements, group life assurance and group income protection.
Professional services firm Aon’s Employee Benefits and Trends Survey 2018 found that just 20% of respondents had already made the necessary changes, while 38% indicated their strategy had not been affected.
Jeff Fox, principal at Aon Employee Benefits, said: "In April, the ‘grandfathering’ measures that many organisations utilised as a short-term approach to maintain their previous taxation position will come to an end - and HMRC [Her Majesty’s Revenue & Customs] are ready to act. We understand they are conducting more frequent audits under the guise of ‘know your customer’ visits, and asking to see flexible benefits agreements to focus on OPRA arrangements."
The effects of the changes will be felt in two key areas. A Type A situation will consist of a normal salary sacrifice reduction, in which employees receive a lower salary in return for their benefit.
In a Type B scenario, staff have the choice between receiving a benefit or being given a cash equivalent. But the fact they are given the choice makes both options taxable, which could affect a range of flexible schemes. This means it is important for employers to establish whether a new tax liability exists that was not there before.
Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.
More than two out of five employers are unaware of the implications of the UK’s new Optional Remuneration Arrangements (OPRA), which came into force earlier this month.
The salary sacrifice tax advantages that have been removed with the new OPRA rules mean that both employers and employees need to be ready for possible tax charges. The changes will impact two of the mainstays of flexible benefit arrangements, group life assurance and group income protection.
Professional services firm Aon’s Employee Benefits and Trends Survey 2018 found that just 20% of respondents had already made the necessary changes, while 38% indicated their strategy had not been affected.
Jeff Fox, principal at Aon Employee Benefits, said: "In April, the ‘grandfathering’ measures that many organisations utilised as a short-term approach to maintain their previous taxation position will come to an end - and HMRC [Her Majesty’s Revenue & Customs] are ready to act. We understand they are conducting more frequent audits under the guise of ‘know your customer’ visits, and asking to see flexible benefits agreements to focus on OPRA arrangements."
The effects of the changes will be felt in two key areas. A Type A situation will consist of a normal salary sacrifice reduction, in which employees receive a lower salary in return for their benefit.
In a Type B scenario, staff have the choice between receiving a benefit or being given a cash equivalent. But the fact they are given the choice makes both options taxable, which could affect a range of flexible schemes. This means it is important for employers to establish whether a new tax liability exists that was not there before.
Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.
