Late Night Travel

RAY CHIDELL investigates the tax charge due when an employer pays for office to home travel after working late.

Where an employer pays for the cost of an employee's travel between work and home, this normally produces 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, cannot participate in that arrangement on a particular occasion.

A minor but important change was made to the relevant Extra-statutory Concession A66 two years ago, which 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.

Conditions

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

• The employee must have been required to work at least until 9pm.
• This must not be a regular requirement for the employee concerned.
• There must not be more than 60 such journeys in the tax year.
• Public transport must not be available as a reasonable option.
• 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'.

A number of points are worth comment. 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, 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. Thus, 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'. Full marks to the Inland Revenue for eliminating a potential administrative nightmare, but the Revenue then loses most of those marks for keeping so quiet about the change and especially 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 says 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.

Finally, it should not be overlooked that the transport has to be in a taxi, hired car or similar. If an employee normally went home with a colleague but, because of working late, had to take public transport home then, on the basis of the wording of the concession, a tax charge would still arise if the employer refunded the cost of that public transport.

Reporting

As long as the terms of the concession are met, employers do not need to include the cost of the transport in pay for pay-as-you-earn 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. If the employer kindly orders a take-away meal to feed those working late, however, then a whole new series of tax issues will arise!

Ray Chidell is a tax partner at Mazars Neville Russell. He produces fortnightly employer tax bulletins available free of charge by e-mailing: ETU@mazars-nr.co.uk.

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