Salary sacrifice schemes are not as simple as they sometimes make out, says Paul Edwards of Horwath Clark Whitehill.

They can leave employers open to tax arrears and penalties. Mr Edwards said: "The idea of giving your employees computer equipment or child care vouchers as an alternative to a salary may sound attractive, but salary sacrifices need careful planning because they are sometimes oversimplified by scheme promoters and can leave employers exposed.

"Schemes like the home computing initiative can be beneficial as they take advantage of the tax and NI savings without increasing employers' overall costs.

"Without careful planning, however, employers can be left with the impression that all they have to do to obtain the tax relief is deduct the value of the vouchers or equipment from the employee's gross pay before tax in the same way as they would for an employer's pension contribution.

"In fact, it is not that simple and it is possible that employers could be exposed to Revenue & Customs demands for arrears of tax and National Insurance contributions, plus interest and penalties."

He went on: "Properly implementing a salary sacrifice puts an employer into contract law. There has to be an agreed and documented change in an employee's terms and conditions to ensure that, from that point on, the individual is contractually entitled to the reduced salary and not the original amount.

"If the change is not made, the employee is contractually entitled to the original, higher amount and Revenue will insist PAYE and NI are accounted for on the higher figure."