Where an employer provides employees with free and subsidised meals, no tax charge arises provided that the conditions in ITEPA 2003, s. 317 are met. However, from 6 April 2011 the exemption is restricted such that it will no longer apply where the meals are provided as part of a salary sacrifice or flexible remuneration arrangement.
HMRC are also challenging some existing and proposed salary sacrifice arrangements that involve canteen arrangements on the grounds that the arrangements are not effective. The challenge centres on the HMRC"s belief that the arrangements are not in line with the exemption in ITEPA 2003, s, 317 but instead place value at the disposal of the employee for the employee to spend in the canteen as he or she wishes. Their argument is that the employee has not really swapped salary for workplace meals, but instead has swapped salary for money or value to spend i a canteen, which remains taxable.
HMRC have published technical guidance explaining their stance. This is available on the HMRC website. Guidance on the canteen arrangements that HMRC regards when they regard canteen arrangements as counting as earnings is available in HMRC's Employment Income Manual at EIM21675.