CIPP Policy Update - October

2 October 2017

CIPP policy update October Optional Remuneration Arrangements (OpRA)

Optional Remuneration Arrangements came into effect from 6 April 2017 and essentially it's the government's way of trying to remove some of the previous tax and National Insurance contribution (NIC) breaks which came about if salary sacrifice was used to pay for Benefits in Kind (BiK).

Although these arrangements have been in since April there are still payroll professionals among us who do not think the changes apply to them as they don't operate salary sacrifice schemes. If this is you then please read on as although salary sacrifice is very much still with us, there are two types of 'arrangement' that come under OpRA. Type A arrangements are the first and are what employers have regarded as typical salary sacrifices, where an employee gives up cash earnings in exchange for a BiK. Type B arrangements are where an employee chooses a benefit rather than a cash allowance, such as a car or living accommodation. So for the purposes of the benefits code, a benefit is provided under an OpRA if it is provided under an arrangement of either type A or type B, so it isn't just salary sacrifice that is captured.

The benefits code has been revalued and the employee is now taxed on whichever value is the higher – the cash or the benefit. However where an employee receives say a car allowance, but there was no option to receive a company car, the employee is taxed on the car allowance – cash is cash, you process as you would have pre-April 2017.

There are four specific exemptions where the rules haven't changed - pensions, childcare, cycle to work and ultra -low emission vehicles; these are the politically astute exceptions so employees get to keep the tax and NIC breaks on those. Transitional provisions (also known as grandfathering) were brought in for arrangements in place before 6 April 2017; so the new rules for these arrangements will take effect from 6 April 2018 for all benefits except cars with CO2 emissions of 76 grams per kilometre and above, employer-provided living accommodation, and school fees. The old rules will continue to apply for these three types of benefit until 6 April 2021.


A few months ago we were made aware of an issue regarding OpRAs when combined with voluntary payrolling. This emerged during an HMRC webinar for agents on employee expenses and benefits. The presenter simply stated that benefits provided via an OpRA could not be payrolled from 6 April 2017, even if the employer was registered to do so, and the benefits had been payrolled for the previous year. Research uncovered that this was due to defects in the legislation that introduced payrolling. The law does not refer to the appropriate calculation, introduced from 6 April 2017, for some benefits and some individuals who receive BiKs from their employer via Type A or Type B OpRAs. Because of the glitch in the regulations, employers who were payrolling benefits covered by OpRA were still required to submit a P11D, which of course defeats one of the benefits of voluntary payrolling – no P11D submission.

Due to this issue, HMRC introduced a concession for those payrolling during 2017/18 whereby as long as the employer has payrolled the correct cash equivalent value of the benefits, (according to 2017/18 rules) the employer will not have to provide a P11D in respect of these BiKs in July 2018.

Guidance and forms

HMRC has provided lots of examples to help employers in their Employment Income Manual (EIM). There is, of course, Booklet 480 – expenses and benefits tax guide and HMRC's guidance 'Salary sacrifice for employers' which have both been updated to reflect the changes under OpRA.

HMRC has not updated the P46 (Car) for in year reporting and you should continue to use the existing form. Employees who need to pay more tax can either contact HMRC or wait for the normal P11D process to pick up any corrections after the end of the tax year. The P11D for 2017-18 will include the 'relevant amount' which is the 'greater of value' and amount foregone.

  • Author Profile
    • Sp avatar Diana Bruce

      Diana is CIPP Senior Policy Liaison Officer and Guest Author for Smart Pension.