Budget impacts salary sacrifice schemes - Shock announcement impacts employer computer loan schemes
Gordon Brown's tenth budget as chancellor of the exchequer sprang a shock for salary sacrifice schemes when the government announced today the removal of the tax exemption on employer loaned computers from 6 April 2006.
This will have a serious impact on many employers and those employees who have taken out salary sacrifice schemes to enable the private use of employer loaned computers in homes. Those presently committed and tied into such schemes may from April 6th be liable to be taxed on the benefit now being provided. This change means many employers will have to review their benefits policies immediately, and many of their employees could be hit by increased costs in less than a month's time.Doug Sawers, Managing Director of Ceridian in the UK
As a result of the announcement, employers will have to review their policies of lending equipment to employees and their families. Employees who have joined a scheme through salary sacrifice will potentially see their costs increase by the tax on either the employer lease costs or 20% of the asset value of the equipment. Many employees will be tied into a three-year scheme, from which they cannot withdraw.
Other measures announced include the removal of tax exemption for employees who are provided with more than one mobile phone for private use.
24 March 2006 - HMRC issue clarification of home computer schemes:
Transitional Arrangements for Home Computer Schemes
Following the Chancellor's budget announcement abolishing the tax exemption on the provision by employers of computer equipment for private use with effect from 6 April 2006, in response to a number of enquiries, HMRC confirm that anybody who has had a computer made available for private use before 6 April 2006 will not be affected by the change. If an employee entered into an HCI scheme arrangement with their employer before 6 April 2006, and under that arrangement the employer is committed to provide a computer to the employee, but for reasons beyond their control the employee cannot take physical possession of the computer until 6 April or later, HMRC accepts that the computer exemption will apply to the provision of that computer.