The Optional Remuneration Arrangements (OpRA) legislation was introduced with effect from 6 April 2017. The legislation counters the tax and NIC advantages of benefits where an employee gives up the right to an amount of earnings in return for a benefit. This includes flexible benefit packages with a cash option, cash allowances and salary sacrifice.
The taxable value is now the higher of the cash foregone or the taxable value under the normal BiK rules. A benefit is deemed to be provided under an OpRA if it is provided under an arrangement of either type A or type B.
Type A arrangement
Type A arrangements are arrangements under which the employee gives up the right, or the future right, to receive an amount of earnings which would be chargeable to tax in return for the benefit.
Type B arrangement
Type B arrangements can be defined as – other than type A arrangements – under which the employee agrees to be provided with a benefit rather than an amount of earnings.
A benefit does not include arrangements under which the employee reduces their working hours or becomes entitled to additional unpaid leave.