- Organisations have one month to make sure they are HMRC compliant
- Many organisations are using a temporary ‘grandfathering’ approach which HMRC will no longer accept
- Just 20% of organisations have made necessary changes
Aon Employee Benefits, the UK health and benefits business of Aon plc (NYSE:AON), has said that its Benefits and Trends Survey 2018 showed 41% of employers are unaware of the implications of the Optional Remuneration Arrangements (OPRA) which are coming into force on 6 April. Just 20% of organisations that responded to the survey had made the necessary changes, while 38% said their strategy is unaffected. OPRA was implemented by the Government in April 2017.
Jeff Fox, principal at Aon Employee Benefits, said:
“In April, the ‘grandfathering’ measures that many organisations utilised as a short-term approach to maintain their previous taxation position will come to an end - and HMRC are ready to act. We understand they are conducting more frequent audits under the guise of ‘know your customer’ visits, and asking to see flexible benefits agreements to focus on OPRA arrangements.
“If companies don’t know if they are impacted by the regulations, we would suggest they seek advice and then act quickly to create long-term compliant solutions. The process can take some time.”
In particular, organisations need to understand any Type A* impacts - which Aon believes are reasonably easy to address - and the more complicated Type B* impacts, where there is a cash equivalent for salary sacrifice. Advice in this area needs to focus on whether there is a new tax liability that did not exist before.
The tax advantages removed with new OPRA rules, mean both employers and employees need to be ready for tax charges. The tax changes impact two of the mainstays of flexible benefit arrangements, group life assurance and group income protection, and will apply from 6 April 2018 at the latest as part of salary sacrifice changes in the Finance Act 2017.
Jeff Fox added:
“We believe the 41% of employers not preparing for OPRA are unlikely to be our clients, as we’ve been preparing ours for some time. Non-compliance not only has tax liabilities but also can have brand PR consequences as HMRC has been known to name and shame organisations.”
