CMS and Salary Sacrifice

[Daffodils2023]

Hi, can anyone help me on the tax efficient savings that companies offer their employees, particulary Car Salary Sacrifice? The reason I'm asking is my ex has a Salary Package of £85k but the Child Maintenance Service are only taking into consideration £71k, they apparently get their figures direct from HMRC so I am trying to work out if it is the Car Salary Sacrifice which is bringing down the taxable income figure with HMRC. He works for a large company on payroll so there isn't any self-assessment. All I can think of is that it is the Car that is billed on the Companies benefits blurb as being a "tax efficient savings scheme"..... Anyone up on tax and can understand whether this is what is happening here? Ive applied for a Variations on the grounds of "Additional Income" and "Diverted Income" but they've rejected it by saying that I havent provided enough evidence... I provided a copy of his salary package and benefits and they said they only get their figures from HMRC, but if its a tax efficient saving presumably it isn't evident in the HMRC figures?

It'll be pension won't it not car - cars aren't salary sacrificed, they're taxed.

The car is called a salary sacrifice scheme on the benefits form from the company, and is billed as Tax Efficient Savings, the pension contribution isn't enough to reduce it down by 14k

Salary sacrifice deffo isn’t included, could it be based on the previous years or do you have incorrect figures?

I don't see how a car can be a non-taxable benefit

Also it’s worked out on the previous tax year, so this would be 21-22, if there’s 25% difference they will recalculate if you ask them too.

Tax efficient savings are something else. Why can't his pension be that amount though? Mine's a similar amount.

@titchy I think its because its an electric car. https://www.pendragonvehiclemanagement.co.uk/news/hmrc-clarifies-salary-sacrifice-car-scheme-tax/#:~:text=For%20electric%20cars%2C%20the%20BiK,drivers%20who%20want%20electric%20cars.

Honestly it makes no diff OP whether it’s electric or not….. the guidance for CMS set out by govt is private and Personal pensions only. Nothing else

@Namechangers123484 sorry not sure I understand what you mean, can you explain?

@titchy because I know the contribution was only c.£4k, its on the package - autoenrolment

Probably pension - that would be 16% into pension which seems reasonable, there are other things which could come off of salary before tax such as purchasing additional holiday days, or a bike through bike to work scheme, or charity contributions.

I don't think there is much you can do for any of these or if there is an electric car scheme that comes off pre-tax and he doesn't want to voluntarily pay more.

Or it could be unpaid leave reducing his salary

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/672432/how-we-work-out-child-maintenance.pdf

Unless a paying parent gets certain benefits, we work out child maintenance using their taxable gross annual income as the starting point.
By ‘income’, we mean earnings from employment, self-employment (profits from a business), occupational or personal pensions and certain benefits.
Gross annual income is the paying parent’s yearly income before Income Tax and National Insurance are taken off, but after occupational or personal pension scheme contributions are taken away.

Interesting. That link only says that insurance and maintenance are salary sacrificed - but I can't see that being more than £2k a year. The value of the car is taxable as a benefit - which will
Mean he pays MORE tax than someone on the same salary who doesn't have the car.

So his CMS salary looks to be in the right ballpark to be honest, £2k for the car maintenance and £1k pm pension. I don't see why you could claim more if CMS is calculated on net salary.

They might have upped their pension with an acc to bring gross down, and the car will be deducted before tax, but it shouldn't be deducted for the purpose of calculating CMS

He could have chosen to pay extra into his pension.

@titchy its not on net its on gross as recorded with hmrc

It's based on taxable gross income. Not total gross income.

@AccountantMum i know its not that, its under 6% as is autoenrolment. The CMS do take into account "Diverted income" - "Converting earnings from a form that counts as income to one that resuts in their being exclused in the calculation can be classed as diverting income" "In order to count as diverted income the money that might have been generated must be paid to someone else, or for another purpose" - I think this can be classed as another purpose. Its a car for own personal use.

@titchy yes thats what I meant and thats what Im saying, thats the figure at HMRC but he can choose to take the salary sacrifice and have a car...which is seen as Diverting Income in the same way anything above 12% pension, dependent on age, can also be considered as diverting income in order to pay less child maintenance.

It's "gross taxable income" though, so if the car allowance is taxable, that alongside his taxable pension contributions would reasonably bring his income down to around the figure.

It will be the electric car, where I work offers a car scheme and yes electric ones are paid for before tax and NI.

Electric cars are eligible for salary sacrifice under HMRC rules. The rules changed on petrol and diesel cars a few years ago.

What car does he drive ?

Electric Mercedes suv

Various posters on this thread have got it wrong. Salary sacrifice won't show in a P60. So if he's paid £85k salaray but sacrifices £15k of that for a car then his gross salary on P60 will be £70k plus the annual bik value of the car - which for an electric car will be lower than the salary sacrifice.

Whether a CMS tribunal would add the salary sacrifice back to his income - I don't know. Probably worth trying though.

Ask for a mandatory reconsideration then when they reject you appeal to the tribunal.