Under a salary sacrifice scheme, an employee forgoes a portion of their salary in exchange for particular goods or services. In most cases, for VAT purposes, the employee is deemed to be buying those goods or services from their employer, the payment being the amount of salary sacrificed.

These schemes are also known as optional remuneration arrangements and were popular because they generate income tax and National Insurance savings. Although many of these savings were removed following changes to the law with effect from 6 April 2017.

The VAT aspects of one such arrangement was recently addressed by the First Tier Tribunal in a case involving Pertemps Ltd (Pertemps Ltd [2018] TC 06583).