Income Tax (Earnings and Pensions) Act 2003 section 228A

General exclusion from exemptions: optional remuneration arrangements

Section 228A removes most tax exemptions for benefits provided through optional remuneration arrangements (commonly known as salary sacrifice or flexible benefit schemes), while preserving exemptions in certain specified categories.

• Where a benefit is provided through an optional remuneration arrangement, the normal tax exemption for that benefit is switched off, and the amount of salary or cash foregone is generally treated as taxable employment income.
• Certain "special case exemptions" — including paid or reimbursed expenses, subsidised meals, trivial benefits, recommended medical treatment, qualifying bonus payments, pension transfer advice, and other benefits — are unaffected because they already contain their own salary sacrifice rules.
• Certain "excluded exemptions" remain fully available even when provided via salary sacrifice, covering areas such as employer-provided childcare, cycle-to-work schemes, pension contributions, statutory redundancy payments, outplacement services, retraining courses, and pensions advice.
• The Treasury has the power to amend the lists of special case and excluded exemptions by statutory order, so these categories may change over time.