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Employers’ tax planning: employee’s late night travel

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Ray Chidell of Mazars Neville Russell provides AccountingWEB/TaxZone readers with the latest in his series of bulletins on employer-related tax issues. Ray is author of the P11D Handbook (available from ABG, tel 020 7920 8991) and offers employers a free, regular e-mailed tax advice bulletin, Employer Tax Update (ETU).

To get on the mailing list for his free bulletins, simply send an e-mail note of your name and company to [email protected]


Late night travel
Where an employer pays for the cost of an employee’s travel between work and home then this will normally produce a tax charge for the employee. However, if certain strict conditions are met then no tax charge arises if, on an irregular basis, the employer meets the cost of late night journeys home. This will typically consist of a taxi or other hired car.

Similarly, an employer may be able to pay for an employee’s journey home without producing a tax charge if the employee normally participates in a car sharing arrangement with other employees but, for some reason, the employee cannot participate in that arrangement on a particular occasion.

A minor but important change was made to the Concession two years ago. Unfortunately, this change received very little publicity. Indeed, the Employer Compliance Manual (still contained on the Inland Revenue’s June 2001 CD of Revenue Manuals) is still clearly based on the old and now incorrect rules.

The late night exemption may be available if all of the following conditions are met:

  1. The employee must have been required to work at least until 9pm.
  2. This must not be a regular requirement for the employee concerned.
  3. There must not be more than 60 such journeys in the tax year.
  4. Public transport must not be available as a reasonable option.
  5. The transport paid for by the employer must consist of a taxi, hired car or “similar private transport which the employer provides solely to take the employee home”.

Picking through the above conditions, a number of points are worth commenting on.

First, it should be noted that the concession only applies if the employee is “required” to work late. If the employee is working late out of choice, rather than being required to do so by his employer (it can happen!) then the Concession does not apply.

There must not be a regular pattern. This is a separate issue from the question of frequency (considered below). If the late working has a predictable pattern, for example a member of staff who is required to work late on the same day each week, then the Revenue will not accept that the Concession applies. Presumably, the thinking is that such an employee should be in a position to make suitable arrangements.

There is a restriction also on the frequency of occasions in the tax year on which the employer can fund late night transport. The Concession applies to a maximum of 60 journeys per employee in any given tax year. If journeys are also being paid for by the employer for the same employee because of a breakdown in normal car sharing arrangements, then any such journeys must be deducted from the 60 that would otherwise be available for the late night part of the Concession.

It is in respect of this limit of 60 journeys that the rules were changed a couple of years ago. Until 5 April 1999, if the number of journeys in the year exceeded 60 then the employer had to go back and calculate the total cost of all journeys in the tax year, even though he may have acted in good faith in predicting that the total would not exceed 60, ie the 61st journey would create a tax charge on all the previous journeys.

The Revenue’s Schedule E Manual at paragraph 10220 now confirms that the Concession applies to a maximum of 60 journeys in any tax year but goes on to say that “if, exceptionally, the number of journeys exceeds 60 then the excess journeys have to be taken into account for tax purposes. So if, for instance, in a tax year there were 63 journeys potentially within the Concession, 60 would be exempt and three taxable”.

So full marks to the Inland Revenue for eliminating a potential administrative nightmare, but the Revenue then lose most of those marks for keeping so quiet about the change and (in particular) for continuing to publish a Manual containing the out of date information.

A further condition for the Concession to apply is that public transport must not be a reasonable option. The Revenue say that this would “include circumstances where, because of the low level of availability/ reliability of services at that time of night, a journey using public transport would be likely to take much longer than a normal journey between work and home”. The Concession does not specifically say so but it would be hoped that it should apply where public transport would be unsuitable for reasons of personal security.

As long as the terms of the Concession are met then employers do not need to include the cost of the transport in pay for PAYE purposes or to show it on form P11D. Similarly, employees are permitted to exclude such payments from their tax returns if satisfied that the exemption applies. Of course, if the employer kindly orders a take-away meal to feed those working late then a whole new series of tax issues will arise!

Further information
For any further advice or assistance in this area, please contact Ray Chidell or Graham Hole on 01273 206788, or your usual contact at Mazars Neville Russell if you have one.


See Ray’s previous bulletins on such matters as employee medical expenses, the choice between van or car, payments in lieu of notice, employee clothing, employee contributions to company cars, tax-free benefits, FPCS, employment status, P11Ds, PAYE Settlement Agreements, Class 1A National Insurance, Company car issues, loans to employees, Christmas parties, and many more.


Company Car Book
Written by Ray Chidell and Alison Sampson, this newly
published book has more than 50 frequently asked questions and extensive coverage of tax planning in relation to company cars and other vehicles, all taking full account of the April 2002 changes. The book is available (price £40) from the publishers on 020 7920 8991.

Ray will be running a company car workshop in August for TaxZone.

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