EIM21831 - Particular benefits: late night taxis: general overview
Section 248 ITEPA 2003
Where an employee is provided with a taxi paid for by his or her employer for a journey from work to home, this represents a benefit to the employee because journeys between an employee’s home and permanent place of work are private journeys [booklet 490].
However, this benefit can be treated as exempt from charge if:
- the failure of car sharing arrangements conditions are satisfied (see below), or
- all 4 late night working conditions are satisfied; and
- the number of such journeys for which a taxi has been provided for that employee in the tax year is no more than 60.
The 60 journeys is a single limit that applies to late night journeys and failure of car sharing arrangements together. This means that journeys under both headings must be added together when working out whether or not the 60 journeys limit has been reached.
For the exemption to apply, these conditions must be satisfied on each occasion that an employee is provided with a taxi for a journey from work to home.
60 journeys per year
It’s sometimes suggested that the exemption applies to the first 60 journeys in a year when a taxi is provided, regardless of the circumstances relating to the taxi being provided. This is not correct. Section 248 is not an annual allowance; it provides an exemption from the Income Tax charge that would otherwise arise on the provision of a taxi home. It can only apply when the late working conditions mentioned in the second bullet above or the failure of car sharing arrangements conditions are satisfied in full. The figure of 60 in the second bullet merely puts a ceiling on the number of journeys that can be treated as exempt from tax and NICs even where all the relevant conditions are satisfied.
So an employee may be provided with a taxi from work to home once a week. Even though the total number of taxi journeys in the year is no more than 60, the exemption in section 248 does not apply, unless all the late night working conditions or the failure of car sharing arrangements conditions are also met on each occasion as well. Conversely, if an employee is provided with a taxi on more than 60 occasions in circumstances where all the late working conditions or failure of car sharing arrangements conditions are satisfied, the exemption will apply only to the first 60 such occasions. The fact that the 60-journey limit is exceeded in a tax year does not disqualify any of the first 60 such journeys from the exemption.
Late night working conditions
There are 4 late working conditions, all of which must be satisfied.
- The employee is required to work later than usual and until at least 9pm.
- This occurs irregularly.
- By the time the employee ceases work, either:
- public transport has ceased, or
- it would not be reasonable to expect the employee to use public transport.
4. The transport is by taxi or similar road transport - this condition is not contentious and is not referred to again in this guidance.
Record keeping
As with any benefit or expense provision, employers who provide late night taxis home for their staff must be able to show that they have treated the provision correctly for the purposes of tax and NICs. Where an employer believes that the exemption in section 248 applies, he or she must have the necessary management checks in place and keep sufficient records to be able to show that the late night working conditions set out in the legislation are satisfied in all cases.
It’s not sufficient for an employer to have a published protocol setting out the circumstances in which an employee can have access to the use of a late night taxi, if nothing is done to ensure that it is applied correctly and that the checking system the employer has put in place to do so is capable of audit. However, this does not mean that it’s necessary for the employer to certify in advance the use of a taxi.
The procedure might, for example, take the form of the employer’s internal guidance for employees on the use of late night taxis along with an internal verification procedure that could be sampled to show that the qualifying conditions have been applied. That will not be the case where an employee is simply given access to a taxi service available after 9pm on call. HMRC would regard work to home travel by such means as subject to the normal employee travel rules. The fact that it may be outside “normal office hours” does not change that.
Failure of car sharing arrangements
See EIM10210 for information regarding transport provided to an employee when car sharing arrangements fail.
Transport provided for disabled employee
No tax charge arises where transport between home and work is provided for a disabled employee (section 246 ITEPA 2003).
Consequences where late night working or failure of car sharing conditions are not satisfied
See EIM10220 for a summary of the tax treatment that applies to journeys that do not fall within the exemption
It’s worth noting that the main guidance on PAYE Settlement Agreements (PSAs) states that taxi fares will normally fall within the meaning of minor items for inclusion in a PSA.