Despite a recommendation from the Office of Tax Simplification that the current benefit in kind exemption for the provision of late night taxis to employees is too complex and should be abolished, the Government has decided to retain it.

However, it is likely that HMRC will take a firmer line on the provision of taxis so it is important to remember that there are strict conditions for the exemption and accurate records of taxi journeys must be maintained by employers.

To qualify for the exemption each journey must meet all of the following tests:

1. the employee is required to work later than usual and until at least 9pm and
2. this occurs irregularly and
3. 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, and
4. the transport is by taxi or similar road transport.

In addition, if there are more than 60 qualifying journeys per employee in a year, the 61st and subsequent journeys are taxable benefits in kind. Where the qualifying journeys in any year greatly exceed 60, it is likely that HMRC will dispute that any are qualifying as test 2 is not met because the journeys are frequent enough to be regarded as regular. It will also challenge regular travel where the annual figure does not reach 60 journeys.

This technical update brought courtesy of our strategic partner PKF(UK) Ltd.