{"id":4773,"date":"2016-09-27T11:55:20","date_gmt":"2016-09-27T11:55:20","guid":{"rendered":"https:\/\/simplylaw.waydevelopers.com\/england-wales\/wiki\/peninsula-business-services-ltd-v-donaldson-salary-sacrifice-schemes\/"},"modified":"2023-11-04T13:12:03","modified_gmt":"2023-11-04T13:12:03","slug":"peninsula-business-services-ltd-v-donaldson-salary-sacrifice-schemes","status":"publish","type":"articles","link":"https:\/\/simply.law\/england-wales\/articles\/peninsula-business-services-ltd-v-donaldson-salary-sacrifice-schemes\/","title":{"rendered":"Sacrificing Salary"},"content":{"rendered":"<p align=\"justify\"><span><span size=\"2\" style=\"font-size: small;\"><span face=\"Arial\" style=\"font-family: Arial;\">In a surprising decision, the EAT has held that the HMRC guidance on the treatment of salary sacrifice schemes during maternity leave is incorrect.<\/span><\/span><\/span><\/p>\n<p align=\"justify\"><b><span><span size=\"2\" style=\"font-size: small;\"><span face=\"Arial\" style=\"font-family: Arial;\">Facts<\/span><\/span><\/span><\/b><\/p>\n<p align=\"justify\"><span><span size=\"2\" style=\"font-size: small;\"><span face=\"Arial\" style=\"font-family: Arial;\">The claimant\u2019s employer, Peninsula Business Services, offered a salary sacrifice scheme for childcare vouchers. However, it was a condition of the scheme that in the event that an employee went on maternity leave, the scheme would be suspended and there would be no entitlement to childcare vouchers until the employee returned to work.<\/span><\/span><\/span><\/p>\n<p align=\"justify\"><span><span size=\"2\" style=\"font-size: small;\"><span face=\"Arial\" style=\"font-family: Arial;\">The reason for this condition was simple. In order for a salary sacrifice scheme to attract favourable tax treatment, an employee must agree to a reduction in his or her contractual pay and the employer then spends the difference between the original salary and the reduced salary to provide the benefit in question to the employee. According to HMRC guidance, benefits such as childcare vouchers provided for by way of salary sacrifice should therefore be treated as non cash benefits rather than as pay.\u00a0 Under the Maternity and Parental Leave Regulations 1999, an employee on maternity leave is entitled to the benefit of all the terms and conditions of her employment as normal, with the exception of pay. It follows that when an employee goes on maternity leave, she will continue to be entitled to non cash benefits such as childcare vouchers, even if there is no longer sufficient salary to sacrifice in order to pay for those childcare vouchers. That means that the employer must pick up the bill.<\/span><\/span><\/span><\/p>\n<p align=\"justify\"><span><span size=\"2\" style=\"font-size: small;\"><span face=\"Arial\" style=\"font-family: Arial;\">The claimant, Ms Donaldson, claimed that this condition in her employer\u2019s childcare voucher scheme was discriminatory because it treated someone who took maternity leave less favourably than someone who did not. She also claimed that it was in breach of the 1999 Regulations because it did not reflect her entitlement to enjoy her normal terms and conditions, including benefits, during her maternity leave.<\/span><\/span><\/span><\/p>\n<p align=\"justify\"><span><span size=\"2\" style=\"font-size: small;\"><span face=\"Arial\" style=\"font-family: Arial;\">The Employment Tribunal upheld her claim, placing reliance on the HMRC guidance.<\/span><\/span><\/span><\/p>\n<p align=\"justify\"><b><span><span size=\"2\" style=\"font-size: small;\"><span face=\"Arial\" style=\"font-family: Arial;\">EAT Decision<\/span><\/span><\/span><\/b><\/p>\n<p align=\"justify\"><span><span size=\"2\" style=\"font-size: small;\"><span face=\"Arial\" style=\"font-family: Arial;\">The EAT decided to take a closer look and established that there was no legislative basis for the HMRC guidance.<\/span><\/span><\/span><\/p>\n<p align=\"justify\"><span><span size=\"2\" style=\"font-size: small;\"><span face=\"Arial\" style=\"font-family: Arial;\">The EAT\u2019s held that it did not make sense to treat childcare vouchers provided via a salary sacrifice scheme as a benefit in kind. The EAT\u2019s analysis went as follows. What in fact happens in a salary sacrifice arrangement is that rather than being sacrificed, the salary earned by an employee is diverted in order to pay for the vouchers before it reaches his or her pay packet and so the vouchers for which the diverted salary has paid should be treated as part of the employee\u2019s pay rather than a separate non cash benefit. Employees are not therefore entitled to continue to enjoy this element of their pay packet during a period of maternity leave.<\/span><\/span><\/span><\/p>\n<p align=\"justify\"><span><span size=\"2\" style=\"font-size: small;\"><span face=\"Arial\" style=\"font-family: Arial;\">The EAT commented that to find otherwise would be to provide an employee who goes on maternity leave with an unjustified windfall and to dissuade employers such as Peninsula from offering salary sacrifice schemes. That surely could not have been the intention of the legislation.<\/span><\/span><\/span><\/p>\n<p align=\"justify\"><span><span size=\"2\" style=\"font-size: small;\"><span face=\"Arial\" style=\"font-family: Arial;\">It followed that Peninsula was not in breach of the 1999 Regulations by proposing to withhold this element of Ms Donaldson\u2019s pay during her forthcoming period of maternity leave. The claim of discrimination also failed.<\/span><\/span><\/span><\/p>\n<p align=\"justify\"><b><span><span size=\"2\" style=\"font-size: small;\"><span face=\"Arial\" style=\"font-family: Arial;\">Comment<\/span><\/span><\/span><\/b><\/p>\n<p align=\"justify\"><span><span size=\"2\" style=\"font-size: small;\"><span face=\"Arial\" style=\"font-family: Arial;\">This judgment will be a relief for those employers who have continued to provide childcare vouchers via a salary sacrifice scheme in spite of the HMRC guidance. It demonstrates a practical, common sense, and surely much fairer approach to the issue of salary sacrifice during maternity and other unpaid family leave.<\/span><\/span><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The EAT has held that the HMRC guidance on the treatment of salary sacrifice schemes during maternity leave is incorrect.<\/p>\n","protected":false},"author":82,"featured_media":7975,"parent":0,"menu_order":0,"comment_status":"open","ping_status":"open","template":"","format":"standard","meta":{"_acf_changed":false,"_joinchat":[],"footnotes":""},"categories":[12331],"tags":[11077,11079,11076,8541,10275,11078,11075,11074],"class_list":{"0":"post-4773","1":"articles","2":"type-articles","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-employment-law-for-employees","8":"tag-childcare-vouchers","9":"tag-claim-of-discrimination","10":"tag-donaldson","11":"tag-employment-tribunal","12":"tag-hmrc","13":"tag-maternity-and-parental-leave-regulations-1999","14":"tag-peninsula-business-services-ltd","15":"tag-salary-sacrifice-schemes"},"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v23.4 (Yoast SEO v27.3) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Sacrificing Salary - Simply Law England Wales<\/title>\n<meta name=\"description\" content=\"&quot;Explore our comprehensive collection of legal articles covering various topics to help you navigate the complexities of the law. 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