In what circumstances are travel expenses for commuting journeys exempt from tax? (Part 2)

There are a number of statutory exemptions that allow employers to reimburse an employee's commuting or private travel expenses. The exemptions apply to very specific situations and there are conditions that must be met in each case. What constitutes "commuting" and "private travel" must also be understood and these terms have been explained in Part 1 of this Payroll Tip.

The situations where statutory exemptions apply that are explained in this Payroll Tip are:

• travel between different employments within the same group of companies
  
  
• transport provided for disabled employees
  
  
• transport home after late night working
  
  
• transport home when car-sharing arrangements break down.

The following situations are discussed in Part 3:

• travel and subsistence during public transport strikes
  
  
• travel and subsistence for offshore oil and gas workers
  
  
• travel provided by works transport services
• shopping trips using works transport services.

Travel between different employments within the same group of companies

If an employee has jobs with different employers, travel between the workplaces does not qualify for tax relief. However, tax relief is available for travel between companies in the same group of companies and to travel between associated companies.

If an employee has two or more employments with employers in the same group, tax relief is available if

• the employee is obliged to incur and pay the expenses,
  
  
• the travel is for the purpose of performing duties of the employment at the destination, and
  
  
• the employee has performed duties of another employment at the place of departure.

In this context, a "group" means a company and any other companies that are 51% subsidiaries of that company.

A further concession applies where a director is a director of two or more companies in the same group or that are associated companies. Tax relief is available for necessary travel expenses between the place where the director normally acts as a director and any other places on the business of the group in the course of the director's duties. An "associated company" is a company on whose board the group is represented because of the group's shareholding or other financial interest.

These provisions, in themselves, do not provide an exemption from the requirement on the employer to report the reimbursements. The payments must be reported and the employee or director may make a claim for a deduction from earnings. However, the employer may be able to obtain a dispensation, thereby avoiding any reporting requirement.

Transport provided for disabled employees

If an employer meets the commuting costs of a disabled employer, the payments are exempt from tax and do not have to be reported. The exemption applies to

• the provision of transport for a disabled employee, or
• the payment or reimbursement of expenses incurred on such transport.

The exemption applies equally where the employer pays directly for the transport.

In this context, a "disabled employee" is an employee who has a physical or mental impairment with a substantial and long-term adverse effect on the employee's ability to carry out normal day to day activities.

A separate exemption applies to the provision of a company car for a disabled employee. The car is not a reportable benefit if the only non-business use of the car is ordinary commuting journeys.

Transport home after late night working

There is no liability for tax where an employer provides transport or reimburses travel expenses for commuting journeys if

• the journey is made on an occasion when the employee is required to work later than usual and until at least 9 p.m.
  
  
• such occasions occur irregularly
  
  
• by the time when the employee ceases work
  
  
  • public transport has ceased to be available for the journey, or
  • it would not be reasonable to expect the employee to use it

• the transport is by taxi or similar private road transport, and
  
  
• the number of previous occasions in the tax year on which transport has been provided, or expense have been paid or reimbursed, in the event of
  
  
  • late night working, or failure of car-sharing arrangements
    is lower than 60.

However, if the number of occasions exceeds 60, the provision or payment in respect of each occasion over 60 is taxable in full. Note that the number of occasions in a tax year when this exemption is used must be combined with the use of the exemption for car-sharing arrangements, as described below.

The conditions for this exemption are very difficult to satisfy. The exemption does not apply, for example, if

• the employee normally finishes work after 9 p.m., contractually or otherwise
  
  
• the employee chooses to work after 9 p.m. rather than being required by the business to do so
  
  
• the late night working is in any way regular, e.g. one night a week, even if it is a different night each week, or once a month, or even one a year
  
  
• the taxi is provided simply because the employee
  
  
  • has to travel home from work in the dark, or
  • has had a long working day and is tired, or
  • has a heavy briefcase or bag to carry home, or
  • travels by public transport to a station that is unmanned, or
  • because the frequency of public transport is reduced
    although a combination of those circumstances may be acceptable
    
    

• the exemption, in conjunction with the car-sharing provision, has been used more than 60 times in the tax year.

HMRC's enforcement of this exemption is unreasonably strict. It is probably impossible to find circumstances where late-night working is irregular but still occurs 60 times in a year, i.e. more frequently than once a week.

Transport home when car-sharing arrangements break down

There is no liability for tax where an employer provides transport or reimburses travel expenses for commuting journeys if

• the employee regularly travels to work in a car with one or more other employees of the same employer under arrangements for the sharing of the car with them
  
  
• the journey is made on an occasion when the employee is unable to use the car because of unforeseen and exceptional circumstances, and
  
  
• the number of previous occasions in the tax year on which transport has been provided, or expense have been paid or reimbursed, in the event of
  
  
  • late night working, or failure of car-sharing arrangements
    is lower than 60.

However, if the number of occasions exceeds 60, the provision or payment in respect of each occasion over 60 is taxable in full. Note that the number of occasions in a tax year when this exemption is used must be combined with the use of the exemption for late night working, as described above.

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