Expenses and Benefits – Free or subsidised mealsFriday, December 18th, 2009
Section 317 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA) provides an exemption from tax under the employment income rules whereby an employer can provide the benefit of free or subsidised meals in a canteen or on its business premises, subject to certain conditions.
The 2009 Pre-Budget Report announced that, with effect from 6 April 2011, the exemption will be restricted in circumstances where the benefit of free or subsidised meals is provided in conjunction with salary sacrifice or flexible benefits arrangements. Such arrangements are intended to allow some employees to purchase canteen meals out of gross pay and hence obtain a significant tax and NICs advantage over the majority of employees who purchase meals using their net pay. The legislation will not affect general canteen subsidies that are available to all employees, for example where the employer provides a subsidy that is reflected in lower canteen prices.
Section 317 of ITEPA will be amended so that the exemption will not apply where the provision of free or subsidised meals is linked to
- a salary sacrifice arrangement in which the employee has agreed to a reduction in taxable employment income and is to be provided with food and drink (or the means of obtaining them) of a value that is commensurate with the amount of income given up.
- a flexible benefits remuneration arrangement which includes the provision of food and drink (or the means of obtaining them) of a value that is commensurate with the amount of income given up.
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