For some years an exemption has been available where an employer can purchase a bus, rail or ferry pass for an employee under an approved salary sacrifice arrangement. The exemption means that no tax is payable on the benefit-in-kind.
Recently Revenue issued a clarification to show that an employee can enter into one of these salary sacrifice arrangements, with their employer’s agreement, more than once a year and the exemption will still apply.
Remunerating staff in a tax-effective manner can make a difference in attracting and retaining good quality employees. So, where you have staff commuting into the workplace using public transport this is a concession well worth considering.
What is involved?
A salary sacrifice is where an employee agrees to take a cut in their pay level, and the employer agrees to provide a benefit that equals the value of the amount of the cut.
In order to qualify for the exemption the employee’s terms and conditions of employment need to show an alteration where the employee has exercised a choice of having the benefit instead of salary with the employer’s consent.
The alteration cannot be retrospective, i.e. you need to make the alteration before the travel ticket is purchased, and it must be in writing.
Also there can be no entitlement to exchange the benefit for cash.
Ordinarily it makes little difference to the amount of income tax employees pay whether salary is paid all in money form or as a mixture of money and benefits. However, with this exemption the employee will pay no income tax on the benefit portion of their pay.