Cycle-to-work meals

The Income Tax (Exemption of Minor Benefits) Regulations 2002 exempt meals that are provided by employers to employees who cycle to work on designated cycle-to work days. The number of such meals has been limited to 6 in the year. As promised at the time of the April Budget, this limit has been removed by amendment Regulations.

Employers may, therefore, provide free meals and drinks to employees when they arrive at work on any occasion where they cycle from home to work on a working day. The day must be one that the employer has designated as a day on which such meals and drinks will be provided to those who cycle to work.

The limit is removed with effect from 25 June 2003.
(Source: www.inlandrevenue.gov.uk/pdfs/nico/ca85.pdf )
...back to 6 June 2003

Buses and bikes

Following a period of consultation, the Income Tax (Exemption of Minor Benefits) Regulations 2002 have been passed by Parliament and will come into force on 6 April 2002. They remove any liability to tax on the provision of lunchtime shopping trips using works buses and breakfasts for employees who cycle to work.

The legislation is already in place to allow works buses and minibuses with as few as nine seats to be used to take employees between home and work without incurring any tax liability from 6 April 2002. The new Regulations remove from an employee any liability for a tax charge on journeys made in a works bus, i.e. one that was used at the start and end of the day for the commuting journey, that

• are for not more than 10 miles in each direction,
• are between the workplace and shops or other amenities, and
• are made on the employee's working day.

In its feedback on the consultation, the Revenue has agreed to consider

• exempting lunchtime shopping trips that are made in a bus that is not a works bus, i.e. one that is hired just for the lunchtime trip, but that situation is not covered by the new Regulations, and
• changing the provisions of section 197AA of the Income and Corporation Taxes Act 1988 so that works buses are tax exempt if they are used to collect employees from a central pickup point, rather than from their homes. The exemption only applies currently if employees are collected from their homes. The proposal, if agreed, would involve a change to primary legislation.

Although many have treated the idea of tax relief on cycling breakfasts as somewhat absurd, the respondents to the Revenue's consultation paper take the matter seriously and welcome the measure as an opportunity to promote commuting by bicycle. The idea is for employers to designate a "cycle-to-work" day, and use the free breakfast as an incentive.

The tax exemption applies to the first six meals in a tax year that are provided

• in recognition of employees commuting by bicycle on a day when they are required to be at work,
• for consumption when they arrive at work, and
• on a day that is designated by the employer as a "cycle-to-work" day.

In response to concerns over the record-keeping that will be required for the cycling breakfast provisions, the Revenue has stated that "employers will be expected to keep sufficient records only to show that a day was a designated cycle to work day".

Other responses suggested that the cycling provision would discriminate against employees who walk or run to work. The Revenue would like to hear from any employers who make meal arrangements for such employees that are not already covered by tax exemptions.
Payroll Briefing 219 - 6 March 2002

Public bus services

A number of special tax relief provisions have been introduced to encourage employers to develop "travel plans", with the intention of discouraging employees from bringing their cars to work, unless they operate a car-sharing scheme. The current tax concessions, and those already planned for April 2002, allow employers to provide works buses for commuting and lunch-time trips and to subsidise bus companies that offer bus services required by their employees.

The bus subsidy concession includes a condition that the Government is now reconsidering. Any subsidies paid to bus companies are tax-free for employees only if the employees pay the same price for tickets as other passengers. Some employers have urged the Government to consider allowing the tax relief to apply also when employees pay reduced fares or travel free. They argue that, as employees travel free on works buses and pay no tax on that benefit, the same relief should apply to bus services. They suggest that, if the tax concession were granted, there would be a number of advantages:

• being able to negotiate a contract with a local bus company knowing exactly what the annual cost will be
• not having to run a works bus service
• saving the costs of providing car parking spaces
• helping also part-time employees and occasional bus users
• contributing to the local community.

The Government has, as a result of these representations, issued a consultation document and invited comments on a number of questions:

• Should such an exemption limit the tax relief by reference to journey distance, e.g. to bus services operating within 10 miles of the workplace?
• Should employers' subsidies be limited to a maximum amount per employee? If so, how much?
• What benefits would there be to local/community bus services particularly in rural, or out of town, areas?
• How many car journeys are likely to be saved each year?
• What kind of employees would be most likely to benefit?
• What kind of employers would be most likely to take advantage of an exemption?
• Are there circumstances where such an exemption would be regarded as unfair?

A copy of the proposals can be downloaded from www.inlandrevenue.gov.uk/drafts/busconsult.pdf. The consultation period ends on 31 December 2001. - Payroll Briefing 211 - 25 October 2001

Travel plans

To encourage employers to design travel plans appropriate to the needs of their workforce, the Government has already removed any liabilities to tax and NICs on the provision of free or subsidised works buses, subsidies to public bus services, bicycles and safety equipment, and workplace parking for bicycles and motorcycles. The Revenue is now seeking comments on two further exemptions for minor travel benefits, one of which was mooted in the documents supporting the last Budget.

The first involves exemption from tax and NICs for up to six cyclist's breakfasts per year. This proposal is apparently is response to requests from employers who designate a few days each year as "cycle to work" days. Those employees who try cycling to work are given free breakfasts and, because the benefit is not generally available, this would otherwise be a taxable benefit.

The provision of meals generally is already exempt from a tax charge, but not meals that are only available to individuals or groups of employees. Tax relief is only available on the provision of cyclists' meals if

• the employee has cycled from home to work in order to perform work under the employment contract, and
• the meal is provided for consumption on the employee's arrival at the workplace, and
• the employer has designated that day as a day on which a meal will be provided.

The second proposal involves the use of works buses during lunchtimes for shopping trips. Currently, the provision of travel to and from work is not taxable as long as the bus has twelve or more seats. From April 2002, the minimum number of seats will reduce to nine. In response to requests from employers, particularly those in out-of-town estates who would like to offer their staff occasional lunchtime trips to the shops or other amenities, the further use of works buses for such trips will be exempt from tax and NICs in order to discourage employees from bringing their own cars to work for that purpose.

To enjoy tax relief, the journeys in the works bus must be

• a distance of not more than 10 miles each way, and
• between the workplace and shops or other amenities, and
• made on a working day.

Copies of the consultation document and the draft Regulations may be downloaded from www.inlandrevenue.gov.uk/consult_new/index.htm. Comments on the proposals are invited by the end of October, to julia.vinall@ir.gsi.gov.uk. Readers should understand that the final Regulations may differ from the provisions described above.
Payroll Briefing 210 - 11 October 2001