Taxi fares for travel to work: who pays the tax?

Taxi fares for travel to work: who pays the tax?

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My client has his office in the West End of London. One of his secretaries has a long tube journey every day. 2 years ago, she broke a bone in her foot and was no longer able to use the tube, while recovering from this injury. The employer suggested that she should take 4 weeks' sick leave on full pay. She said she wanted to continue working, so the employer agreed to pay taxi fares for her to and from work. This came to £290 per week for 8 weeks. Neither party thought that these would be taxable, but HMRC are now claiming that this is a taxable benefit and that she must pay tax and NICs on this. She is refusing to do so, and says she will take the employer to a tribunal if they refuse to pay these liabilities for her. Has anyone met this situation? If so, what is the best way forward?

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By frustratedwithhmrc
13th Nov 2011 10:30

HMRC are right, this is just commuting to work.

The circumstances themselves are unfortunate, but this is clearly just a form of commuting to work and therefore should be taxed upon the individual. If the company have paid these taxi charges for her then she has received a benefit in kind and again a tax liability arises.

The company is in an unfortunate position having tried to do the right thing, but not advised her that these costs would be chargeable to tax. However, I fail to see how this would constitute some form of liability on the company in the face of an employment tribunal, there has been no unlawful deduction (as correct application of PAYE cannot be unlawful) and no constructive dismissal or similar (unless this is part of a wider case).

I would be very wary of any employee threatening action in an industrial tribunal and (regardless of the costs of the tax arising in this instance), be tempted to seek a clarification of the position from a solicitor with experience of employment law.

From past experience I have found that if an employee threatens an employer with an industrial tribunal over something which is at best a 50/50 misunderstanding, then they will usually end up at an industrial tribunal at some point in the future when something more serious causes a parting of the waves.

I would be very cautious at this point.

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By George Attazder
13th Nov 2011 13:20

HMRC should be referred...

... to EIM10080.  What you've decribed sounds substantial (being able to use the tube normally, but not being able to do so until the injury has healed) and eight weeks is by no means short-term.  I'd expect pragmatism to prevail in the real world.

If they don't agree and it falls to be taxable/NICable, it should have been dealt with as additionally salary, and so the employee is entitled to assume that any tax/NI has been deducted prior to payment.  IMHO.

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