If a salary sacrifice arrangement fails to meet the necessary HMRC criteria for tax purposes, what happens to the intended tax advantage?
Answer
The salary reduction may be ignored, and the employee is taxed as if the sacrifice never occurred
For an arrangement to be valid for tax efficiency, it must strictly adhere to HMRC rules. Failure to comply means that the reduction in salary is disregarded for tax purposes, and the employee is taxed on their original, higher gross earnings.
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