VAT has been payable by employees on salary sacrifice schemes since 2012.  As a VAT registered business, you can either claim the VAT back on day one and then at the end of the salary sacrifice issue an invoice to the employee for the gross amount of salary sacrifice including VAT.  This invoice is shown as paid via salary sacrifice, so the employee doesn’t pay twice (the salary sacrifice amount includes VAT).  Or you can simply not claim back the VAT, making a note in your accounts to this effect.  We recommend the second method but either is fine.  As long as the VAT is paid HMRC are happy.