Revenue Approved Salary Sacrifice Agreements (Section 118B TCA 1997)

Practitioners are reminded that section 118B of the Taxes Consolidation Act 1997 (as inserted by section 21 of the Finance Act 2008) places on a statutory basis Revenue practice in relation to salary sacrifice agreements.

In particular, section 118B specifies the two arrangements for which Revenue has given approval in relation to salary sacrifice agreements. These are:-

• Travel passes issued by an approved transport provider under section 118(5A) of the Taxes Consolidation Act 1997, and
• Shares appropriated to employees and directors under an approved profit sharing scheme within the meaning of Chapter 1 of Part 17 of that Act, which are exempt from a charge to tax by virtue of section 510(4) of that Act.

Practitioners should be aware that in all other circumstances where salary sacrifice arrangements are in place, the salary foregone is treated as an emolument of the employee and is chargeable to income tax as such.

This legislation is effective from 31 January 2008.

A detailed commentary on the application of this legislation will be published in the next edition of Tax Briefing.