CIOT comments on the Inland Revenue consultation on the tax and NICs treatment of employer subsidies of public bus services, submitted on 18 December 2001
The Chartered Institute of Taxation is glad to have the opportunity to comment on this proposed change.
We think that any attempt to encourage travel plans is to be welcomed and we see benefits in the proposed change for employers, the local community, the environment generally, as well as the employee. We should be glad to comment on any draft legislation in due course and would make a plea now that it is as simple as possible, not too prescriptive and not obsessed with regulatory control.
Our comments on the 7 questions are as follows:
1. We see no reason for any mileage limit. As soon as you impose a limit you have a cliff-edge problem. If the objective is to cut out single occupancy car journeys what difference does it make if it is a 10-mile or 30-mile journey? One might argue that the longer the journey the better.
This is unlikely to act as an incentive to long distance commuting. The employer has to be willing to subsidise the longer journey, any service must be viable (even with the subsidy) and individual employees must be willing to undertake a long public transport journey.
2. We see the suggestion to limit the subsidy to an amount per employee as fraught with difficulties.
How would such a limit be applied? Per number of journeys? per number of employees? per route subsidised? What happens when an employee leaves? Could this make a previously allowable subsidy taxable on the remaining employees? What record keeping would flow from any limit? Would record keeping of journeys actually taken become necessary? This would most definitely not be deregulatory.
If the Government genuinely wants to encourage green commuting we do not think there should be any restrictions.
3. Apart from our general comments above we are not able to answer this question in any detail.
4. Apart from our general comments above we are not able to answer this question in any detail.
5. We suspect that the employees most likely to benefit are the lower paid. They are arguably the ones most likely to need to save money on transport and least likely to have access to a car.
Those with standard hours are also likely to benefit as a public bus service is more likely to meet their needs. These may be lower or higher paid, according to their inclination to use public transport.
6. Employers would be motivated to subsidise to make it easier to recruit and retain staff. At a site where there are parking problems, traffic congestion, and/or poor current public transport facilities, employers will be encouraged to provide subsidies to make their employees’ lives easier. Some employers will see this as an easy way to give employees a small tax-free benefit (which has recruiting and retention advantages). There may be employers who do it merely to show their green credentials or because of their desire to be public spirited and of benefit to the local community. It may, for example, become commonplace for an employer’s logo to be advertised on a subsidised public bus service.
7. Unfairness might creep in if certain routes were subsidised while others were not but this is not something on which it would be possible to legislate. The ability and inclination of the employers to subsidise cannot be controlled, in the same way that the provision of any other benefit is uncontrollable. Some employees get free lunches in staff canteens, some do not.
If more than one employer was subsidising a route it might be necessary to consider how best to share out the reductions in fare that might result. Otherwise multiple subsidies might appear to operate unfairly compared to those with single subsidies. However, such matters can be settled by the bus companies and the relevant employers without any legislative interference, particularly if there was no limit on the tax-free benefit.
A loss of equity might be seen in restricting this to bus services. What about commuter trains? Could they be subsided too? In addition, would it be acceptable for employers to subsidise a special railway halt, next to, for instance, a business park? The savings in commuting, from the main station to the park, would be substantial and of considerable benefit to the community and the environment, as well as to the employee. We urge the Government to consider giving exemption for all types of travel plans.
We look forward to having the opportunity to comment on any draft legislation in due course.
18 December 2001
Technical Department
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