SALARY SACRIFICE ARRANGEMENTS
Section 118B of the Taxes Consolidation Act 1997 came into effect on 31 January 2009. This section now copper fastens on a legislative basis, Revenue’s treatment of salary sacrifice arrangements. A salary sacrifice arrangement is defined as “any arrangement under which an employee forgoes the right to receive any part of his or her remuneration due under his or her terms or contract of employment, and in return his or her employer agrees to provide him or her with a benefit.”
Revenue has confirmed that all salary sacrifice arrangements are subject to PAYE, PRSI and the Income levy (with certain specific exceptions). Employers need to be alive to this provision particularly in the course of making a lump sum payment to an employee on termination. If an employee chooses to forego remuneration in return for an increased pension contribution from the employer, he/she could face an immediate income tax exposure in relation to the salary foregone. Advice should be sought on any tax planning steps particularly where an employee is receiving a large severance payment.
For further information please contact Anne Lyne, Associate alyne@hayes-solicitors.ie