Cambridgeshire Travel for Work Partnership

Tax and Travel Plans

Stephen Potter

Professor of Transport Strategys.potter@open.ac.uk

Tax Efficient Benefits

• Company accountants may not care much about Travel Plans but they love tax efficient benefits

• Traditional tax efficient benefits include pensions and healthcare (and was the main stimuli for Company Cars)

• Tax efficiency can help win support from your finance department for a Travel Plan

Tax and Commuting• Generally, except for

parking, employer supportto staff for commuting is treated as taxable ‘income in kind’

• ‘Insubstantial’ benefits are ignored

– NOTE: for non-employees - students, customers or visitors – Travel Plan benefits are not taxable

• But many Travel Plan measures are now exempt from Income Tax and National Insurance Contributions (NICs)

Loans and Salary Sacrifice Schemes

• Interest-free loans to buy season tickets, a bicycle or anything legal - up to £5,000 in any tax year.

• Salary Sacrifice can be used to purchase bicycles and bus tickets/passes– The employee pays through a cut (‘sacrifice’)

in their pre-tax salary made up for by a payment by their employer.

– This cuts out income tax and effectively cuts the cost of buying a bike or bus travel by at least a third

– Salary Sacrifice also used for pensions and HR departments are getting keen on this method

Works Buses

• Employer-provided works buseswith 9+ seats used for commuting

–Occasional use for other trips (e.g. lunchtime shop runs) is OK

Public Bus Services

• Employer-subsidies to public bus services to your site(s) are tax free - when there is a contract with the operator.

• Contracts with bus operators can include discounted or free fares for staff.– But other ways to subsidise tickets are still

taxable– It only applies to local buses serving your site– So you must subsidise in the right way

to be tax efficient

Bicycle Exemptions

• The provision of Bicycles and Bicycle Safety Equipment (e.g. helmets and lights) has been exempt from tax since 1999.

• The provision of cyclists breakfasts exempt from 2002 (Initially only 6 a year - from 2003 unlimited)

• In practice they never were taxed (being ‘insubstantial’), but this makes the situation clear

• Bicycle maintenance, rescue services etc. ARE liable for tax

Carshare Backup

Alternative backup ‘get-you-home’ transport for car sharers is tax-exempt (up to 60 trips a year)

Taxable Travel Plan Incentives

• Payments to give up car parking rights (‘Cashout’)

• Vanpools• Any other cash incentives

– (prize draws seen as ‘insubstantial’)

• Subsidies to train, tram or Tube fares - or bus fares where there is no contract with the operator

• Flexible schemes (vouchers, points ‘Green Miles’) need to be carefully designed….– They could be taxable on the whole package if they contain a

mix of taxable and tax exempt measures

Business Travel

• Business travel has always been tax-exempt unless limits are passed (e.g. the maximum ‘mileage rate’ for using cars

• Some recent measures favour a ‘greening’ of business travel:– Single 40p/mile car mileage rate– 20p a mile cycle mileage rate– 5p a mile car passenger rate

• Linking a Travel Plan to restructuring mileage rates and promoting the car passenger rate can produce big savings and win support

Employer Taxation-1

• NICs exemptions benefit employers as well• Otherwise only normal tax system rules apply (but worth

checking as this can cut the cost of Travel Plans). These include:

–Relief for capital expenditure as ‘machinery and plant’ (e.g. bicycles, buses, computer equipment)

Employer Taxation-2

• On manufacturing sites, structures can qualify for ‘industrial buildings’ capital allowances

• There is a 100% enhanced capital allowances for expenditure on greener cars and any refuelling infrastructure (but not on bicycles!)

– In practice ECA are of little use• Employer tax incentives are a weakness

Inland Revenue Advice and Guidance

• The Inland Revenue has a Green Transport Section on its Website:

http://www.inlandrevenue.gov.uk/green-transport/index.htm

• This contains a (rather vague)‘green travel’ factsheet • We are working on developing the paper guide you have for a new

NBTN/DfT website

• Check with your local Inland Revenue Office if in doubt when developing a Travel Plan measure

Overall…...

• Tax is less of an issue for Travel Plans than it was a few years ago

• There is a legacy from when tax was more problematic for Travel Plans

• Many Travel Plan measures are now a tax efficient benefit• This should help get your finance department to support Travel

Planning