Grocery Salary Sacrifice! Buyer beware

As part of the December 2025 Employer Bulletin, HMRC have shared information on promoted Salary Sacrifices Grocery Schemes. They confirm that they are neither approved or promoted by HMRC and are unlikely to qualify for the savings that the promoters indicate. There is no 8% employee NI saving.

The following has been issued as part of Employer Bulletin December 2025:

Clarifying the Optional Remuneration Arrangement rules at section 228A ITEPA 

HMRC are aware of third-party scheme providers advertising salary sacrifice schemes, such as grocery vouchers, which incorrectly claim they can make savings on employer National Insurance Contributions, with HMRC approval. HMRC does not approve businesses to advertise their schemes as tax compliant.  

While a third-party provider may present a scheme as tax-efficient, ultimate responsibility for tax and National Insurance Contributions rests with the employer. Therefore, employers must independently verify scheme compliance with regulations. 

The optional remuneration arrangement (OpRA) rules, introduced in April 2017, largely removed the tax and National Insurance Contributions advantages for benefits provided through salary sacrifice arrangements. 

This was to address the use of these arrangements where employees agree to give up a portion of their earnings for a benefit, resulting in lower income tax and National Insurance Contributions compared to receiving the full amount in cash. 

Section 62 ITEPA explains a benefit is provided under OpRA if an employee gives up current or future taxable earnings for a benefit, or enters any agreement to receive a benefit instead of earnings. Usually by way of vouchers or non-cash vouchers, earnings are based on the higher of the voucher’s value or cost and the salary sacrificed. 

Further guidance on OpRA including general exclusion from exemptions is available. 

National Insurance Contributions implications 

Non-cash vouchers provided through salary sacrifice, where the employer facilitates provision, must vary employment terms and conditions, are treated as earnings under National Insurance Contributions legislation and attract Class 1 National Insurance Contributions. Arrangements not meeting specific exemption requirements in Schedule 3 of the Social Security Contributions Regulations 2001, will be subject to Class 1 National Insurance Contributions for both employer and employee. 

Opinion

Promoters of Grocery Salary Sacrifice Schemes that claim that the concept was either introduced by HMRC, or claim full compliance or that they are HMRC approved or cleared is contrary to the HMRC statement, and that they are likely to not work and that HMRC have not approved any business claiming they are.

Whether provided by vouchers, eVouchers, pre-loaded cards, or other credit token method etc, the indication from HMRC is that a liability for Class 1 applies as these payment vehicles for buying shopping are not for legitimate business use. The amount sacrificed remains subject to Class 1 National Insurance Contributions via the method used.

With provision of these payment methods for groceries and a salary sacrifice arrangement, there is no tax nor Class 1 employee or employer saving as under OpRA law the sacrificed amount is taxed and under Schedule 3, liable to Class 1 NICs (not Class 1A).

So do they work? Not according to HMRC.

Who is liable for any underpayment? Well, that’s likely to be the employer who may end up footing the underpayment bill.

HMRC have previously questioned the validity of some so called employer provided nursery schemes, many of the heavily promoted schemes do not meet qualifying conditions, there is neither any tax not Class 1 NI saving for either the employee nor for the employer. the government do offer a Tax Free childcare scheme via an HMRC facilitated account.

PAYadvice.UK 10/12/2026