Childcare Vouchers – salary or benefits and is current HMRC Guidance Wrong?

I am very interested in the recent EAT decision in the case of Peninsula Business Services v Donaldson. HMRC guidance has been, until now, that contractual non-cash benefits provided under a salary sacrifice scheme must continue to be provided during ordinary maternity leave and an employment tribunal in the above case held that it must therefore be discriminatory for an employee to lose the benefit of childcare vouchers during her maternity. The EAT disagreed on PBS’s appeal saying that there was no legislative basis for supporting the HMRC guidance in relation to childcare vouchers. It was held that, as childcare vouchers represent part of salary (since pay is substituted for vouchers under the salary sacrifice scheme), they must be regarded as remuneration and women are not entitled to the benefit of their normal remuneration during maternity leave.

It’s an interesting one in my view and I wonder whether it will be further appealed. The fact is, vouchers are non-transferable, they can’t be converted into cash by the employee and they are payable to a third party rather than to the employee herself. Those are facts which would normally suggest that they can’t be considered “wages” or salary” and, as such, are non-cash benefits. This position (as is the one currently adopted by HMRC) is further supported in my view by the fact that a number of employers have schemes whereby their employees can sacrifice salary for extra holiday. In that case, could the employer argue that the extra bought holiday be treated as remuneration and not therefore accrue during maternity leave? I would argue not, particularly as the reduced salary from the salary sacrifice results in reduced SMP during the first 6 weeks of maternity leave. I will therefore be very interested to see whether Donaldson appeals.

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