As of the 1st January 2012 HMRC will treat any salary sacrifice by employees in exchange for benefits as consideration for VAT purposes.
This clarification is contained in an HMRC briefing paper which confirms that where a benefit received is liable to vat, input tax is recoverable as under the normal rules however output tax will be due to paid over on the amount of salary sacrificed.
If the value of the benefit received is of a higher value to the amount of salary sacrificed then the higher amount will be subject to output VAT.
This will affect firms which supply flexible benefit packages such as childcare vouchers, cycle to work scheme and higher pension contributions under a salary sacrifice. Businesses will have to decide whether they will absorb the extra cost or if not, they will have to review any schemes and amend the terms to cover the cost of the increased VAT going forward.