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Wrong bus

30 August 2016
Issue: 4565 / Categories: Tax cases , Admin

Nottingham City Council; T Straw (TC5269)

Tax liability of free bus pass provided by employer

Nottingham City Council provided a free bus pass to an employee S under a salary sacrifice arrangement. HMRC decided it was a benefit in kind and assessed him tax. It also charged the council class 1A National Insurance.

The council and the employee appealed. They said the bus pass was exempt under ITEPA 2003 s 243 because it was financial support for a local bus service.

The First-tier Tribunal agreed that buying a bus pass supported the local bus service but that on its own was not sufficient to qualify for relief. The judge said the natural reading of s 243 and s 266 (exemption of non-cash vouchers for exempt benefits) taken together is that ‘to satisfy the exemption at s 243 the employer has to provide some support for the local bus service other than buying...

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