HMRC has updated the guidance for businesses on the treatment of businesses expenses by adding a new section related to paying or refunding transport costs.
If you provide transport to your employee for travel between their workplace and home because of coronavirus, this is considered to be a benefit in kind – journeys between an employee’s workplace and home are private journeys. If you reimburse the cost of transport between workplace and home for your employee, this is treated as earnings and you must deduct and pay PAYE tax and Class 1 National Insurance through payroll.
In some circumstances there is an exemption from paying tax on this benefit. For this to happen, all of the following four conditions must be met:
- the employee has to work later than usual, and until at least 9pm
- this happens irregularly
- by the time the employee finishes work, either public transport has stopped or it would not be reasonable to expect them to use public transport
- the transport is by taxi or similar road transport.
Your employees may regularly travel to work in a car with one or more other employees using a car-sharing arrangement. If this arrangement stops because of unforeseen and exceptional circumstances, which are coronavirus related, and you provide transport or reimbursement of the expense of transport from your employee’s home to workplace, this may also be exempt.
NB The total number of exempt journeys cannot exceed 60 journeys in a tax year. This is a single limit that applies to the late-night journeys and the failure of any car-sharing arrangement, together. If these requirements are not met, free or subsidised transport is taxable and should be reported through a PAYE Settlement Agreement as a coronavirus related benefit.