As readers may be aware draft legislation has been issued dealing with the announcement in the Pre Budget Report 2009 that restrictions are to be placed on the tax exemption for free or subsidised meals where an employee has an entitlement in conjunction with salary sacrifice or flexible benefits arrangements.

HMRC has now issued an explanatory note to accompany the draft legislation. Currently there is no tax charge on the provision of meals for directors or employees if the meal is provided in a canteen or on the employer's premises and certain conditions are met, for example all employees may obtain a free/ subsidized meal.

The draft legislation provides that no tax exemption will apply in circumstances where employees are in effect using a designated amount of their gross remuneration to fund the purchase of food and drink at work.

The full text of the explanatory note is reproduced here.

Once they take effect, the new legislation will apply equally to salary sacrifice and flexible benefits remuneration arrangements entered into before, on and after 6 April 2011.