OpRA is the acronym for an optional remuneration arrangement. Before April 2018, these were termed “salary sacrifice” arrangements. Essentially, both are benefits in kind (BiK) offered to employees in place of salary increases.
Recent changes ensure that, that where such benefits are offered recipients many are taxed as if the cash value of the benefits provided were taken as salary.
Reviewing BiK Arrangements
Readers should also note that there are still a small number of BiKs that are tax and NIC efficient.
Accordingly, we feel that there is a need to review all BiK arrangements before the end of each tax year to make sure that the most tax efficient remuneration options are being provided.
OpRA Review Checklist
Where an arrangement falls under the new rules, the work to be included in an annual OpRA review could be:
- Test each benefit provided against the OpRA legislation.
- If OpRA applies, what are the increased tax and NIC costs for the employee and is the employer willing to compensate?
- Consider alternative benefit arrangements that have a lower tax and NIC footprint.
- Consider substitution for exempt BiKs, including pension provisions, cycle to work schemes, ultra-low emission cars, and employer-supported childcare.
- Consider an arrangement to purchase more holiday, effectively unpaid leave.
Our initial report would usually be directed to the employer to agree on any changes, and then provide updates for employees to communicate these changes if any.
Please call if you would like to schedule in a BiK review before the end of the tax year.