Where an employer pays for the travel costs of an employee for a journey between home and work (i.e. commuting), that cost would normally be a taxable benefit in kind for the employee. However, there is currently a particular tax exemption for late night taxis used if it meets the following criteria:
- it occurs irregularly
- the employee is required to work later than usual and until at least 9pm
- at the time the employee finishes work either public transport was unavailable or it would be unreasonable to ask the employee to use it
- the transport provided is by taxi or some equivalent
- the total number of journeys is no more than 60 a year
If all of the criteria are met, the journeys do not trigger a benefit in kind. You will need to keep accurate records of why each employee took a taxi to get home and the timing of those journeys.
This tax exemption for late night taxis is due to be abolished from April 2012, so you will need to rethink your employees' travel arrangements in future. Under current legislation, the cost of taxi journeys for employees on business or to or from work is tax allowable for the business.
By Jo Nockels
Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.