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CLAUSE 60 EXEMPTION FOR WORKS BUS SERVICES: EXTENSION TO MINIBUSES

SUMMARY

1.   This clause extends the existing tax exemption for employees travelling from home to work on an employer provided works bus.  The minimum number of passenger seats is reduced from 12 to 9. This will make it easier for small employers to take advantage of this tax exemption.

2.   To ensure that minibuses are safe, the exemption will apply only to vehicles originally constructed to carry 9 passengers or more.

DETAILS OF THE CLAUSE

3.   Subsection 1 : the clause amends section 197AA ICTA.

4.   Subsection 2 : ensures that use of a vehicle as a works bus does not count as use of a company car under section 157.

5.   Subsections 3 and 4 : define a minbus as vehicle with 9 to 12 passenger seats.

6.   Subsection 5 : provides for a car benefit charge under section 157 to be removed.  This is because the reduction in seating capacity may come within the meaning of a car for schedule E purposes.

7.   Subsection 6 :  requires the minibus to conform with construction and use requirements. It may only include the number of seats the vehicle was originally designed to accommodate.  This is to ensure safety.

8.   Subsection 7 : provides that this section is to take effect for the year 2002- 03 and subsequent years.

BACKGROUND NOTE

9.   The 1999 Finance Act introduced Section 197AA, which removed the tax charge under Section 154 in respect of the benefit of a works bus service.

10.Employees can travel from home to work and back without a tax charge on a works bus if it is a road passenger vehicle with a seating capacity for 12 or more passengers.

11.Currently if an employer provides a commuting minibus which has fewer than 12 passenger seats each employee enjoying free or subsidised travel would be liable to a tax charge on the benefit.  The value of the benefit would be the cost to the employer of providing the bus service, apportioned among the individual employee beneficiaries.