Ordinary commuting journeys between a permanent workplace and home are private journeys for tax and National Insurance purposes, according to draft guidance published by HMRC. Under the planned changed to Section 248 ITEPA 2003, if the cost of that journey is met by the employer, it is a benefit in kind and tax and National Insurance Contributions (NICs) will be due.

There are circumstances however, when an employee’s journey home from work late at night, paid for by their employer may be exempt from a tax and NICs charge, as long as:

• all the late working conditions are satisfied; and
• the number of occasions in the tax year on which a taxi is provided is no more than 60.

For the exemption to apply, both these conditions must be satisfied on each occasion that an employee is provided with a taxi for a journey from work to home.

"It is sometimes suggested that the exemption applies to the first 60 occasions in a year when a taxi is provided, regardless of the circumstances relating to the taxi being provided. This is not correct. Section 248 is not an annual allowance; it provides an exemption from the income tax charge that would otherwise arise on the provision of a taxi home. It applies only when the late working conditions are satisfied. The figure of 60 merely puts a ceiling on the number of journeys that qualify even where all the late working conditions are satisfied," according to HMRC's draft guidance.

"An employee may be provided with a taxi from work to home on average once a month, or once a week, but even though the total number of taxi journeys in the year is fewer than 60, the exemption in section 248 does not apply, unless all the late night working conditions are also met on each occasion as well."

There are three separate late night working conditions, all of which must be satisfied:

a. the employee is required to work later than usual and until at least 9pm;

b. this occurs irregularly (EIM21833); and

c. by the time the employee ceases work

• either public transport has ceased, or
• it would not be reasonable to expect the employee to use public transport.

As with any benefit or expense provision, employers who provide late night taxis home for their staff must be able to show that they have treated the provision correctly for the purposes of tax and NICs. Where an employer believes that the exemption in section 248 applies, he must have the necessary management checks in place and keep sufficient records to be able to show that the three late night working conditions set out in the legislation are satisfied in all cases. This might, for example, take the form of the employer’s internal guidance for employees on the use of late night taxis and a record of an internal authorisation procedure that shows that the qualifying conditions have been considered and applied. That will not be the case where an employee is simply given access to a taxi service available after 9pm on call. HMRC said it would regard work to home travel by such means as subject to the normal employee travel rules. The fact that it may be outside “normal office hours” does not change that, according to the draft guidance.

"In most cases it is clear whether an employee who works until at least 9pm is also working later than usual. Something is usual if it conforms to a common or habitual pattern. For some employees it is usual to work until after 9pm, for others it is not."

Examples given by HMRC in this respect include:

• Most employees who work in a restaurant or pub are required to work late most nights and until at least 9pm (unless perhaps they usually work a shift earlier in the day). Consequently if a member of bar staff who usually works until closing time is provided with a taxi home when the pub shuts, the exemption does not apply because it is usual for this employee to work late and until at least 9pm.
• A secretary who normally works 9 to 5 is asked one day by her manager to work late to help finish a job. She works until 10pm and then the employer provides a taxi to take her home. As she was required to work later than usual, and until after 9pm, she satisfies the terms of the first condition of the exemption. However, the conditions on irregularity and appropriateness of use of public transport must still be met.
• An employee is contracted to work from 12.00 am to 8 pm but in fact often works until 10pm or later. This employee has an established pattern of late night working. Consequently if the employer provides a taxi to take the employee home on a day when he works beyond his contracted hours, but no later than his established working pattern, the exemption does not apply because he was not working later than usual.

The second of the late night working conditions requires that the occasions on which an employee works later than usual and until at least 9pm occur irregularly. Clearly, therefore, a taxi provided to take home an employee who works late every Friday would not qualify for exemption. Even if the day of the week varies, if an employee works late for one night per week and on these occasions is provided with a taxi for the journey home, this would be a regular weekly occurrence.

For the provision of a taxi home to be treated as covered by the exemption on grounds that it occurs irregularly, it has to be occasional and infrequent. A taxi provided on a daily basis for a month in order to deliver a project is still regular. The 60 day limit on journeys qualifying for exemption is not relevant in deciding whether or not a particular journey home is regular. Situations that illustrate the application of this exemption include:

• An employee who normally works 9 to 5 is required to work until at least 9pm on the last but one working day of each month in order to ensure that the employer’s payroll operates correctly to pay all employees on the last working day of the month. On these 12 occasions each year the employer provides a taxi to take the employee home. The 12 occasions on which the employee works later than usual and until at least 9pm are clearly a regular part of the person’s employment and the exemption in s248 does not apply.
• An employee who normally works no later than 6pm, is required to work until at least 9pm for a couple of nights in a week in order to finish a particular job which has caused considerable and unforeseen problems for his employer. On these nights the employer provides a taxi to take the employee home. On these occasions the employee works later than usual and until at least 9pm. Whilst he is provided with a taxi on a couple of occasions in the week concerned, this arises out of a particular set of circumstances and we would not regard it as a regular occurrence. In this situation, provided there is nothing to suggest that it was likely to become an ongoing event, we would accept that the second late night working condition is satisfied. If, however, this pattern of working became a regular part of the person’s employment, the exemption would cease to apply. The first late night working condition is also met in this example.
• An employee is contractually required to work 9am to 6pm but often works until 8pm and occasionally until 10pm if a job has to be completed. If he works until 10pm the employer provides a taxi to take him home from work. Although the employee is contracted to work until 6pm it is usual for him to work until 8pm. Until that time he is not working later than usual. But if he works until 10pm he is working later than usual and as long as these occasions are irregular, the second of the late night working conditions is satisfied.

It is a matter of fact whether public transport for an employee’s journey has ceased by the time an employee finishes working later than usual and at or after 9pm. If a normal journey from work to home requires an employee to use more than one form of public transport, and one of those forms of public transport for part of the journey had ceased to be available, HMRC said it accepts that this condition applies to the whole journey. For example, if an employee works in a city centre, he may take a train from there to the suburb in which he lives and a bus from the train station to the end of the road in which he lives.

The legislation does not prescribe circumstances where it would be reasonable for an employer to not expect an employee to use public transport where it is available. However, HMRC said it does not accept that the exemption applies where a taxi is provided after 9pm to an employee solely on grounds that he or she

• has to travel home from work in the dark; or/and
• has had a long working day and is tired, or/and
• has a heavy briefcase, or similar, to take home with them; or/and
• travels by public transport to a station that is unmanned.

"In many areas, and especially in bigger towns and cities, many employees will be travelling from work to home after 9pm on public transport. The frequency of the service may be reduced compared with earlier in the day but it is reasonable to expect employees to know this from published timetables and to make plans accordingly," HMRC commented.

"For instance, if the train for the employee’s journey normally departs at 30 minute intervals during the day but at 60 minute intervals after 9pm, one would expect the employee to know this and to arrive at the station accordingly. Reduced frequency of service after 9pm is not of itself sufficient cause for the exemption to apply, if the nature and duration of the journey is not significantly different from that at other times of day. However, HMRC accepts that if reduced availability and/or reliability makes it likely that a journey after 9pm would take significantly longer than an equivalent journey at another time of day, the exemption would apply."

"The extent to which an employee’s journey from work to home after 9pm on public transport is significantly different from a journey earlier on in the day, so that it is reasonable for an employer not to expect the employee to undertake that journey, depends on the facts in each case. But, as a convenient yardstick for testing whether this part of the third late night working condition is met, HMRC will accept that if a journey made after 9pm by public transport is likely to take over an hour longer than it would during the day it will meet the condition."

"Apart from the issue of the employee having a significantly longer journey after 9pm, an employer may also consider the employee’s perception of personal safety when deciding whether it is reasonable to expect them to use public transport. As with the extent to which journey times increase after 9pm, each case will depend on its own facts. However, for the exemption to apply, the circumstances of the case must demonstrate a significant difference from the normal situation where people continue to use public transport after 9pm."

HMRC said the use of a cab would be acceptable, for example, where:

• An employee works late and until after 9pm on irregular occasions. When she finishes work a train service is available for her usual journey from work to home but the timetable indicates the journey will take nearly two hours instead of the usual 45 minutes. On these occasions the employer provides the employee with a taxi for the journey home. HMRC accepts that in such circumstances, if the employer decides to provide a taxi home the exemption in s248 would apply on the basis that it would be reasonable to not expect the employee to use public transport which meant an extra hour plus travelling time over his or her normal journey home.
• The employee’s normal journey takes 60 minutes but after 9pm it takes 30 minutes longer. While, in itself, her journey home is less than an hour longer than normal, she lives in a rural area where, at that time of night, and in the circumstances of her late working, her employer considers that it would not be reasonable to expect her to use public transport and, therefore, provides a taxi. In such circumstances the exemption applies.

The draft guidance aims to clarify what those circumstances are and explains how to apply the criteria, which must be applied on each occasion, to decide whether or not the journey is exempt from tax and NICs.

Although not a formal consultation, HMRC is inviting views on the draft guidance.