IR5 9 March 1999 HELP FOR GREEN TRANSPORT A package of measures to encourage green commuting and help cut red tape for business will, from 6 April 1999: - remove the employee benefits tax charge on - works buses - subsidies to public bus services - bicycles and cycling safety equipment - workplace parking for bicycles; - introduce capital allowances and a tax free cycling allowance for employees using their own bicycles on business travel; and - allow employers to pay tax free for alternative transport when car sharing arrangements temporarily break down. These measures will encourage employers to establish green transport plans and help employees travel to work without using their own cars. Employers will also benefit from reduced paperwork as a result of the removal of the tax charge. DETAILS 1. Employees are generally taxable on benefits, including travel benefits, which they receive by reason of their employment (although some benefits, for instance, beneficial loans of #5,000 or less to buy a season ticket, are already exempt from tax). 2. This means that where - for example, as part of a Green Transport plan to encourage employees to get to and from work other than by private car - an employer lays on a works bus for their home to work journey, a tax charge can arise on the employees who use the travel facility. 3. From 6 April 1999, there will be no tax charge on the following green commuting benefits provided by employers: (i) works buses with a seating capacity of 17 or more which are used to bring employees to and from work (ii) general subsidies to public bus services used by employees to travel to work, provided the employees pay the same fare as other members of the public (iii) bicycles and cycling safety equipment made available for employees to get between home and work (iv) workplace parking for bicycles (and motorcycles). In addition - (v) employees who use their own bicycles for business travel will be able to claim capital allowances on a proportion of the cost of the bicycle. (vi) An authorised tax free mileage rate of 12p per mile for business cycling will apply. So employers can pay up to 12p per mile to their employees tax free for using their own cycles on business travel; and employees will be able to claim tax relief on 12p per business mile if their employer provides no payment (or be able to claim relief on the balance up to 12p per mile if the employer pays less than this rate). (vii) An existing Extra Statutory Concession (ESC A66) will be extended - see Annex - to help employers promote car sharing arrangements by their employees. This will allow employers to pay tax free for alternative transport to get car sharers home when exceptional circumstances, such as a domestic emergency, mean that the normal car sharing arrangements unavoidably break down. NOTES FOR EDITORS 1. For employees earning more than #8,500 a year, benefits in kind which they receive by reason of their employment are generally taxable (along with their wages or salary). Otherwise it would be a simple matter to avoid tax by arranging for employees to be paid in non-cash form. 2. Tax relief has never been available for the cost of an employee's journey to and from his or her permanent workplace. Where an employer pays for that journey or provides facilities or equipment for it (such as a works bus or a bicycle), the benefit is therefore chargeable to tax. 3. The Government's White Paper on the future of transport, 'A New Deal for Transport', notes that green transport plans can make a major contribution to easing congestion. The exemptions now being introduced by the Chancellor will help extend choice in transport and secure mobility in a way that supports sustainable development. 4. Removing these tax charges will also have a beneficial effect on business compliance burdens, because employers will no longer have to calculate and report these benefits to the Inland Revenue on behalf of their employees. 5. The cost to the Exchequer of this package of measures will be about #5 million. 6. In addition to the new measures outlined above, there are two existing tax provisions which employers establishing Green Transport plans may find helpful: (a) Beneficial loans exemption: loans on preferential terms to employees do not give rise to a tax charge where the total loan(s) outstanding is not more than #5,000. This enables employers to offer interest-free or low interest loans to help employees buy a public transport season ticket without the employee being faced with a tax charge. (b) For employees who may need to change clothes and to shower after arriving at the office because, for example, they cycle or run to work, tax is not chargeable on the free use by employees of changing room and shower facilities at an employer's premises, provided these facilities are generally available to all employees. 7. An extra statutory concession is a relaxation which gives taxpayers a reduction of liability to which they are not entitled under the strict letter of the law. Most concessions are made to deal with what are, on the whole, minor or transitory anomalies under the legislation and to meet cases of hardship at the margins of the code where a statutory remedy would be difficult to devise or would run to a length out of proportion to the intrinsic importance of the matter. 8. Inland Revenue extra statutory concessions are of general application, but in a particular case there may be special circumstances which must be taken into account in considering the application of a concession. A concession will not be given in any case where an attempt is made to use it for tax avoidance. 9. Details of current Inland Revenue concessions are published in a free booklet, IR1, available from any Tax Enquiry Centre or Tax Office. They are also available from the Inland Revenue Information Centre, South West Wing, Bush House, Strand, London, WC2B 4RD. The revised concession published today will be included in a later edition of the booklet. INLAND REVENUE PRESS OFFICE Media enquiries to: 0171 438 6692/6706/7327 (Out of hours: 0860 359544) Non-media enquiries to: 0171 438 6420/6425 (Office hours only) Inland Revenue information is on the Internet: www.inlandrevenue.gov.uk REVISED EXTRA STATUTORY CONCESSION A66 Payments for employees journeys home: late night travel and breakdown in car sharing arrangements Where an employer pays for an employee's journey between his workplace and home, the cost to the employer is generally treated under present law as a benefit to the employee and forms part of his taxable income from the employment; no off-setting deduction would normally be allowable under the Schedule E expenses rules. Where, however:- 1. Late night journeys home a. an employee is occasionally required to work late but those occasions are not regular; and b. by the time the employee can go home, either public transport between the employee's workplace and home has ceased or it would not be reasonable in the circumstances for the employer to expect the employee to use it, the employee will not be charged income tax on the cost of a taxi, hired car, or similar private transport which the employer provides solely to take the employee home after work on such occasions. For the purposes of the concession - a requirement to work late means working until 9pm or later; - regular means a predictable pattern, for example if late night transport is provided every Friday; - circumstances in which, although public transport has not ceased, it would not be reasonable for the employer to expect the employee to use it to get home 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. 2. Car sharing breakdowns a. an employee travels to work under regular home to work car sharing arrangements with other employees; but b. the employee cannot on a particular occasion get home in the shared car because of unforeseen and exceptional circumstances; and c. the employer pays for or provides the employee's journey home the employee will not be charged income tax on the cost of the journey. Unforeseen and exceptional circumstances include circumstances where the employee travels home at his normal time but, for reasons beyond his control, he cannot travel in the shared car at that time. They also include circumstances where the employee expects to travel home at his normal time in the shared car and the car travels at that time but in the event the employee needs to travel home at a different time. They do not include circumstances where, on any occasion, inability to travel home in the shared car might reasonably have been anticipated This concession applies to a maximum of 60 journeys in a tax year (whether under (1) or (2), or a combination thereof). # = pounds sterling