Transport Home - Late Night Working - HMRC clarifies circumstances in which the tax exemption applies

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10 January 2008

Section 248 of the Income Tax (Earnings and Pensions) Act 2003 sets out two situations in which no tax liability arises when an employer pays an employee's commuting expenses at the end of the workday. The two situations are where:

• the employee exceptionally works late in the evening and goes home by taxi, and
  
  
• exceptional circumstances prevent the employee from using car sharing arrangements to go home.

For the tax exemption to apply, a number of specific statutory conditions must be met in each case. Apparently in response to abuses of the first of these two exemptions, HMRC has published new detailed guidance in the Employment Income Manual. This manual is written for the use of tax inspectors but is published openly on the HMRC website.

In summary, the guidance emphasises that, for the exemption to apply for any particular commuting journey, all four of the statutory conditions must apply. The legislation, in addition, allows the exemption to be used no more than 60 times in a tax year. This limit does not mean that employees can have paid taxi rides home 60 times a year. It is not an annual allowance. In the case of each journey, all four statutory conditions must be met.

A detailed explanation of the conditions and how HMRC believes they should be applied is provided in this week's Employer FAQ.

...UK Payroll News - Latest

Sources:
Late night taxis - general overview

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