All arrangements made after 27 July 2011 are new agreements for VAT purposes. In most cases, the value of the benefit will be the same as the amount of salary sacrificed. This means the purchase VAT (input tax) recoverable will be offset by the sales VAT (output tax) payable.
The provision of employee benefits, such as childcare or childcare vouchers, pensions and healthcare are not subject to the new VAT treatment, but some benefits that previously didn't attract VAT, will now be affected such as cycle to work schemes, face value vouchers and food and catering.
The changes will only affect benefits where the employee is seen to be "paying" for them. Any goods and services given free of charge will be free of VAT as long as these benefits are available to all employees.
If you would like to find out more about the forthcoming changes to the VAT rules, contact Nigel Moore at firstname.lastname@example.org.