Late night transport for employees

New HMRC guidance for employers providing late night transport for employees could have wide-ranging implications for many UK businesses.

The guidance, issued in January 2008 following a period of consultation, could affect employers’ ability to claim tax and national insurance contribution (NIC) exemption where they cover the cost of an employee’s late night transport home (in particular for taxis).

Although there are currently no changes to the relevant legislation, HMRC has not stated how it will deal with previous years, including those cases where they have already initiated an enquiry into the tax/NIC treatment. It is understood, however, that HMRC will now be seeking to settle each enquiry on a case-by-case basis and will be taking account of the conditions specified in the recently-issued guidance.

The guidance states that, in order for the tax/NIC exemption to apply, a number of conditions must be satisfied on each occasion a taxi is provided for an employee and, in any event, the exemption will only apply to the first 60 journeys taken by each employee in each tax year.

Employers must implement processes that can be audited to check the use of late night taxis. Implementing and rigorously following an appropriate procedure is crucial – simply providing unconditional use of a taxi service available after 9.00pm on call 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, must now review the arrangements they have in place to ensure compliance with the recently-issued guidance.

In addition, for those employers where HMRC has launched an enquiry into the treatment of late-night taxi costs paid in previous years, and that enquiry has not yet been settled, the position should be reviewed taking account of the new guidance.

Contact us for more information about how to apply the guidance to your business and prepare for any enquiry into past use of late night transport.