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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 four situations where statutory exemptions apply that are explained in Part 2 of 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.
Four further situations where statutory exemptions apply are discussed in this Payroll Tip :
- 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 and subsistence during public transport strikes
If the public transport normally relied on by employees is disrupted due to a strike or other industrial dispute, no liability for income tax arises if the employer provides alternative transport for the commuting journeys or reimburses the employees for expenses they incur on such transport.
The exemption also extends to the provision of overnight accommodation at or near the employees' permanent workplace or the reimbursement of expenses incurred by employees in connection with such accommodation.
Travel and subsistence for offshore oil and gas workers
When an employee's permanent place of work is an offshore installation, such as an oil rig, the entire journey from the employee's home to the port and then onwards by boat or helicopter to the rig, and the same journey to return home, are commuting journeys. If the employer provides accommodation overnight in the vicinity of the port, local transport from the accommodation to the port and the transfer to the rig, all of those costs are incurred in respect of commuting travel and are fully taxable.
However, this statutory exemption removes from a tax charge the provision of
- transfer transport, i.e. transport by sea or air, between the mainland of Great Britain or Northern Ireland and the offshore installation,
- necessary related accommodation and subsistence that is provided at reasonable cost, and
- local transport,
or the reimbursement of the employee's expenses incurred for such transport, accommodation and subsistence.
The conditions are that
- the place of arrival or departure on the mainland is one to or from which transport between the mainland and the offshore installation is provided for employees generally, and
- the travel would not qualify for tax relief if the employee had to incur the costs personally.
Offshore installations are
- fixed production platforms
- floating production platforms
- floating production storage and offloading vessels (FPSOs)
- floating storage units (FSUs)
- mobile offshore drilling units (MODUs) including drillships, semisubmersible and jack-up rigs
- flotels (floating accommodation units).
Travel provided by works transport services
Where one or more employers arrange for their employees, on a working day,
- to be picked up from their homes or from a central pick-up point by a bus (i.e. a passenger vehicle with 12 or more passenger seats) or minibus (a vehicle registered to carry 9 or more passengers) and taken to their permanent place of work, or
- to be taken from one workplace to another,
no tax liability arises if the service is
- available generally to employees of the employer, or of each employer, and
- is used, or substantially used, only by those employees or by their under 18-year-old children.
The exemption applies whether the employer owns the bus itself or hires it on contract from a bus operator. However, the exemption relates to the bus service not to the bus itself. If an employer uses a bus both to run a works bus service and to take the employees on an office outing, the works bus service is exempt but the office outing is a taxable benefit. The annual value and running expenses of the bus would need to be apportioned fairly between the two to arrive at the cash equivalent of the benefit of the office outing.
Two or more employers may band together to provide a works bus service. The provision is exempt if the conditions are met in both or all of the employments.
Shopping trips using works transport services
Where one or more employers arrange for their employees, on a working day, to be conveyed by bus or minibus (as defined above) on a journey between the workplace and shops or other amenities that is a single journey of not more than 10 miles, no liability for income tax arises.
The bus or minibus used for this service must be a vehicle that is used to provide a works bus service (as described above). The employer(s) can only provide exempt shopping trips for employees, e.g. during their lunch breaks, if a works bus service is also provided.
...back to 30 March 2006
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For Payroll and Human Resource Professionals
