HM Revenue & Customs has published new guidance that could affect employers’ ability to claim tax and National Insurance Contribution exemption where they cover the cost of an employee’s late night transport home – in particular, when travelling by taxi.
This means that providing a taxi home for workers who work late from time to time will be treated as a benefit in kind, although in practice, many employers are likely to pick up the cost.
The guidance states that in order for the tax/NIC exemption to apply a number of conditions must be satisfied each time a taxi is provided for an employee.
In particular, employers must be able to demonstrate that the employee was working later than 9pm and that they do not work this late regularly. In addition, the exemption will only apply to the first 60 journeys taken by each employee in each tax year.
Andy Groves (pictured), senior partner at PricewaterhouseCoopers LLP in Milton Keynes, said: "This new guidance will affect some Milton Keynes businesses more than others. For example, pubs and clubs often provide taxis to take staff home late at night – but such journeys may no longer qualify for the tax / NIC exemption.
“Employers must start using processes that can be audited to check the use of late night taxis. Simply providing employees with unconditional use of a taxi service, available after 9pm, will not satisfy the requirements for tax exemption.
“Every employer who meets the costs of late-night taxi travel for employees and wants to apply the tax / NIC exemption, should ensure the arrangements they have in place are compliant with the new guidance.”
While the changes are purely guidance and there have not been any changes to the relevant legislation, it is not clear how HMRC intends to deal with unresolved enquiries relating to late-night taxi costs paid in previous years.
Mr Groves added: “It is likely that HMRC will seek to settle any outstanding enquiries about taxi costs on a case-by-case basis and some companies could face significant potential liabilities as a result.
"Where such enquiries are under way, we are advising employers to review their position to take account of the new guidance.”
