When Can a Taxi Home be a Tax Free Benefit?
Originally sent: September 5, 2007During the 'rush hour' at Houston's Hobby Airport, a flight was delayed due to a mechanical problem.
Since they needed the gate for another flight, the aircraft was backed away from the gate while the maintenance crew worked on it. The passengers were then told the new gate number, which was some distance away. Everyone moved to the new gate, only to find a third gate had been designated for them.
After some further shuffling, everyone got on board, and as they were settling in, the flight attendant made the standard announcement, 'We apologise for the inconvenience of this last-minute gate change. This flight is going to Washington, D.C. If your destination is not Washington, D.C., then you should 'deplane' at this time.'
A very confused-looking and red-faced pilot emerged from the cockpit, carrying his bags. 'Sorry,' he said, wrong plane.'
Hopefully this is not the kind of transport problem you have ever had to face. But do you ever have to take a taxi home rather than use public transport because you have had to work very late? Or have you ever needed to pay for one of your staff to do so? If so, this would normally be counted as a taxable benefit. However, there are circumstances where you can provide this benefit but not have to tax it as a benefit, and not have to pay Employer’s National Insurance either.
The law on this has been with us for some time, but recently Revenue and Customs decided they should give us clearer advice on the rules. They are planning to issue the new guidance formally in a couple of months, but in the meantime have put a proposed draft on their website.
The basic rules for this are quite straightforward:
- The employee is required to work past 9:00 pm and working this late is not part of the normal work pattern;
- This requirement is irregular;
- By the time the employee stops work either
- public transport has ceased, or
- it would not be reasonable to expect the employee to use public transport;
- This claim is not made for the same employee more than 60 times a year.
In the first condition, it is important that not only is the employee not contracted to work past 9:00 pm but also does not do so as part of an established pattern, whether or not asked to by their employer.
If the Revenue can see any kind of pattern at all, the claim to provide the benefit tax free will fail. The circumstances must be unusual.
The third rule could be more contentious. Clearly there can be no dispute about whether or not the public transport has ceased, and the Revenue generously regard this rule as satisfied if this applies to even only one part of the journey. But their opinion about whether it is reasonable to expect the employee to use public transport at that time might differ from yours. It may not be good enough, for example, to say that it is dark, your employee is female, and she is concerned about her safety, as the Revenue could argue that if it is reasonable for night workers then it must be reasonable for her. It will depend very much on the facts of the case. If she lives in a remote rural area this argument will probably win the day. If you are using the argument that it takes much longer to get home by public transport at that time, be aware that the Revenue tend to use a “one hour” rule to assess this, although this is not statutory – if the journey takes more than an hour longer they will take this as prima facie evidence that it is not reasonable.
Bear in mind that the final rule is not an allowance. It is not the case that you can provide a taxi for someone working later than 9 as long as this does not happen more than 60 times a year, and then ignore the other rules. All four rules apply to every journey.
All in all, quite a tough set of rules. But sometimes you will find yourself in circumstances that meet the requirements, so be aware of the rules and be ready to claim a tax free benefit where appropriate. And also be aware that if you trade through a company, you are an employee of that company and may therefore be entitled to an occasional use of this benefit yourself. Nowhere in the rules does it say that the concession does not apply to the Managing Director, or that the instruction to work late cannot be given by the Managing Director on behalf of the company to the Managing Director as an employee of the company. Be prepared, though, in this instance, to have compelling reasons and to justify that it really was a requirement (for example to satisfy a client dictated deadline) rather than simply your choice.
Adviser Breakthrough Training Solutions Ltd. takes no responsibility for loss occasioned by any person acting or refraining from action, or in consequence of any other person acting or refraining from action, as a result of the material in this article.
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