OpRA includes any arrangement where an employee either gives up a right to pay in return for a benefit, or has the option of receiving pay instead of a benefit. For example, if an employee has the option of a cash allowance instead of a company car.
Who does this affect?
The new rules apply to all employees whose remuneration packages include salary sacrifice or flexible benefit arrangement, entered into on or after 6 April 2017.
Any arrangements that were in place before 6 April 2017 for company cars, accommodation or school fees aren't affected until 2021, unless there is a material change to the arrangement.
What difference will these changes make?
If an employee is offered a cash allowance or a benefit for different amounts, the employee will pay tax on the higher amount even if they choose the lower amount between the cash and benefit.
For example, if an employees are offered a:
Or,
- Company car equivalent to £3500
The employees who choose the £4000 cash allowance aren't affected. They will pay tax on the £4000 cash allowance that they receive through their payroll. However, employees who choose to take the company car equivalent to £3500 will now be taxed on the higher amount of the offer, £4000.
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