School fees and salary sacrifice.

IanIan

If I sacrifice £x of my salary so that my my employer can pay £x towards my child's school fees, do I just have to pay tax on £x? If this is permissible, I'll save a substantial sum, so that makes me think the Taxman will have thought of this already!

Any help gratefully received. Thank you.

heretolearn_2

I doubt very much that the HMRC will accept this as a salary sacrifice scheme. You can't just replace part of your salary by having employer pay for something directly, otherwise we'd all be doing it for our mortgage/rent/utilities/shopping etc and be paying no tax.

The rules are fairly simple. The HMRC guidance is here

http://www.hmrc.gov.uk/specialist/salary_sacrifice.pdf

The really relevant part of the rules is:
"The employer will need to satisfy HMRC that the
employee’s entitlement to cash pay has been reduced, that a non-cash
benefit has been provided by the employer, and that the employer is not simply meeting the employee’s own financial commitments.

It's not a non-cash benefit, and it is just meeting your own financial commitments.
I can't see any advantage in doing this and it may well be seen as tax/NI evasion on the part of both you and your employer.

Dead_keen

You'll normally have to pay tax unless you earn very little (less than £8,500 including the school fees and other benefits) and your employer contracts with the school directly: http://www.hmrc.gov.uk/paye/exb/a-z/s/school-fees.htm

taxing

Hi

For it to work, your employer needs to contract direct with the school and accept billing responsibility - so the bill is in their name and not your 'pecuniary' liability.

Your employer will then renegotiate and reduce your annual salary by the amount they will pay to the school. So, how do you gain?

The national insurance is saved; both employers and employees, on the value of the fees.

Regards

John_Pierpoint

I think education is different from most disguised benefits.
The employer may be able to set up some sort of charitable trust for the education of the children of its starving wage slave workers?

vman

IanIan wrote: »

If I sacrifice £x of my salary so that my my employer can pay £x towards my child's school fees, do I just have to pay tax on £x? If this is permissible, I'll save a substantial sum, so that makes me think the Taxman will have thought of this already!

Any help gratefully received. Thank you.

It’s an old post but I’ll comment anyway. You can you use salary sacrifice to part fund school fees but technically you can only fund after school care (so the out of core hours component). For example, my daughter’s last school had core hours of 8:30am to 4:20pm but the school was open from 8:00 until 6:00 so the salary sacrifice could only fund 8:00 until 8:30 and 4:20 to 6:00pm. How this is calculated is down the how the school sets its fees. That school only offered a single all-inclusive fee so everybody paid from 8:00am to 6:00pm whether they used the extended hours or not. This gives the school a little leeway in determining how much their out-of-hours component is, as it’s hard to dispute – after all, nobody could ever be billed that amount as they only offer an all-inclusive fee. By some strange coincidence (ahem!) they decided the out of hours care cost is exactly the same as the original salary sacrifice limit. Luckily I’m still on the old salary sacrifice scheme so I can sacrifice about £250/month (I believe the limit is about half that now) so I could put the full amount towards my bill.
My daughter’s current school is a little more complex. They have a fee for the core hours and everything else is add-ons. After school homework clubs, music lessons, evening tea, etc. , are all individual charges but, in the main, can be charged to the salary sacrifice childcare vouchers. So I now get a separate invoice for that stuff.

Anyway, in the first instance I would say speak to the school, they deal with this stuff all the time.

It’s a shame, but so many evening/weekend sports clubs (hockey training, etc.) could also take advantage of this but very few do (there’s a bit of Ofsted paperwork to do, they need to be registered child supervisors to be accepted, but it’s fairly basic). This would allow parents of non-private school children to take advantage of a decent family friendly tax scheme. Currently I’m sure most don’t. The larger summer camp providers make use of this scheme, so if you use a provider regularly then get them to sign up!