HMRC: salary sacrifice can't be used to donate via payroll giving
Howard Lake | 7 September 2009 | News
Workplace Giving UK, which promotes giving to charity via the payroll, has secured a clarification from HMRC on whether workplace giving could operate via salary sacrifice schemes.
Elena Joseph, charity liaison director at Workplace Giving UK, was aware that some large employers were operating workplace giving for their employees via their salary sacrifice schemes. She added: “we didn’t want any of the companies and charities we work with to fall foul of any legislation, so we were very keen to get some clarification from HMRC”.
Nick Jones, senior policy adviser at HMRC wrote advising: “For a salary sacrifice arrangement to be effective, the employee should have given up control of the money sacrificed. This is explained in more detail in HMRC ./guidance which can be found online at
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www.hmrc.gov.uk/specialist/salary_sacrifice.pdf
As is clear from this ./guidance, a salary sacrifice arrangement is not effective if, in practice, the employee has merely asked the employer to apply part of his cash remuneration on his behalf.”
Joseph expanded on this interpretation, saying that HMRC had “clarified that Workplace Giving schemes were always intended to allow individual employees the freedom of choice to make donations to causes that were important to them.
“Unfortunately, salary sacrifice schemes cannot allow such a choice as in effect the individual employee is “sacrificing” his or her salary and cannot therefore have any say over what charity or cause it ends up with. An employer can nominate a cause and invite employees to sacrifice salary via such schemes for that charity but the actual donation eventually made is a corporate donation from the company and not an individual donation from the employee.”
Workplace Giving UK point out that there is nothing to stop employers running both salary sacrifice schemes and Workplace Giving schemes. However, they are very different methods of giving to charity.
It is now clear that salary sacrifice can not be used to donate to the charity of an individual’s choice via the payroll.
www.workplacegiving-uk.com
About Howard Lake
Howard Lake is consultant editor of UK Fundraising. He founded the site in 1994 and successfully sold it in 2022. As director of Giving X Ltd he is exploring growing giving on a massive scale.
He is the founder of Fundraising Camp and co-founder of GoodJobs.