The exemption for parking provision and expenses under section 237 ITEPA 2003 exempts the provision, reimbursement, and payment of parking at or near the employee’s workplace. If an employer were to provide, reimburse or pay for parking facilities and then recover this from the employee’s gross earnings under a salary sacrifice arrangement, the exemption no longer applies, and the provision becomes taxable under section 203A ITEPA 2003. Under section 69A ITEPA 2003, if an employee receives a benefit in exchange for gross salary, the employee is taxed on either the cost of the benefit or the amount of salary given up as taxable earnings to the employee per section 203A(1) ITEPA 2003. The employer is obliged to report the taxable amount on for P11d.
From April 2017, most salary sacrifice arrangements were withdrawn with the introduction of optional remuneration. Per section 69A ITEPA 2003, optional remuneration can take the form of an agreed deduction from an employee’s gross pay in return for a benefit, known as type A arrangements or, an agreement under which the employee elects to receive a benefit instead of cash pay known as type B arrangements.
Only a few exemptions still enjoy tax efficiency where they are provided in conjunction with an optional remuneration arrangements or salary sacrifice. These are known as excluded exemptions under section 228A ITEPA 2003. Some of the most common exemptions which still utilise the excluded exemption under the legislation include employer pension contributions per section 308 ITEPA 203, cycle to work schemes per section 244 ITEPA 2003 and, becoming more and more prevalent, the provision of electric or low emission cars per section 120A ITEPA 2003.
From a National Insurance Contribution (NIC) standpoint, whether the amount is liable to class 1 NIC or class 1A NIC relies upon the fact whether the parking is being provided by the employer or being paid or reimbursed by the employer. Should the employer provide the parking whereby the supply is in the employer’s name, the amount will be liable to class 1A NIC. Where a salary sacrifice arrangement is operated on an employer provided benefit, the employee will continue to enjoy a saving in respect of class 1 NIC from the amount of earnings given up under the arrangement. However, if the employee were being reimbursed or the employer were paying for the parking on their behalf direct to the supplier, the amounts would be treated as earnings under section 3 SSCBA 1992. This means any sacrifice arrangement becomes completely null and void as the amount would be liable to class 1 NIC.
Further Croner-i Commentary:
416-752 ‘Parking Costs’
412-905 ‘Optional remuneration arrangements (OpRA)‘
412-907 ‘Exemptions and OpRA’
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