Changing Operations: Campus and Business Management

Tax Benefits – making the most of your Travel Plan

Stephen PotterProfessor of Transport Strategy

The Open University

Workshop Structure1. Presentation on current travel plan tax

incentives, limitations and pitfalls (guidance note provided)

2. Questions and discussion on above

3. Report on on-going consultations and organisations involved

4. Group session on using travel plan tax incentives and identifying reform priorities

5. Feedback

Tax and Commuting

• Baseline is that any significant employer support to staff for commuting is treated as taxable ‘income in kind’

• Students are not employees so any travel plan benefits to students are not taxable

• Parking is an exemption and many travel plan measures are now also exempt from Income Tax and National Insurance Contributions (NICs)

Loans and Salary Sacrifice Schemes

• Interest-free loans to buy season tickets, a bicycle or anything legal– up to £5,000 in any tax year.

• ‘Salary Sacrifice’ can be used to purchase bicycles and bus tickets/passes– The employee pays through a cut (‘sacrifice’)

in their pre-tax salary made up for by a payment by their employer – so cuts out income tax and NICs

– Salary Sacrifice also used for pensions and child care, and HR departments are getting keen on this method

Buses

• Employer-provided works buses with 9+ seats used for commuting are tax-free

• Employer-subsidies to public bus services to your site(s) are tax free - when there is a contract with the operator.

• Contracts with bus operators can include discounted or free fares for staff.– But other ways to subsidise tickets are still taxable– So you must subsidise in the right way to be tax efficient

Bicycle Exemptions• The provision of bike parking, bicycles and

bicycle safety equipment (e.g. helmets and lights) are exempt from tax.

• Cyclists breakfasts (unlimited from 2003) are tax exempt

• Bicycle maintenance, rescue services etc. ARE liable for tax

Other exemptions

• Alternative backup ‘get-you-home’ transport for car sharers is tax-exempt (up to 60 trips a year)

• Insubstantial benefits - like freebies and small incentives/prizes

• Some employers have got bike doctor and rescue services agreed as ‘insubstantial’.

Taxable Travel Plan Incentives• Payments to give up car parking rights • Subsidies to train, tram or Tube fares • Any substantial cash incentives • Flexible schemes (vouchers, points ‘Green Miles’) need

to be carefully designed….– They could be taxable on the whole package if they contain a

mix of taxable and tax exempt measures

• You could limit some measures to students only to avoid employee tax implications

Questions and discussion

• Points of clarification on existing concessions• Any tips/warnings on using travel plan tax concessions• Will cover lobbying for change next – not now

Travel Planning and Taxation – The movers and shakers • Transport Taxation Group

– Lobbying group containing environment/transport NGOs and researchers

– Supported by Campaign for Better Transport (formally Transport 2000)

– Had several successes– Makes a pre-budget submission on transport/environmental

taxation and has annual meeting with Treasury officials

Movers and shakers (2)• National Business Travel Network

– Has a taxation group – for user advice and supply ‘evidence base’ to government (not lobbying)

• ACT Travelwise– Network to promote travel planning and mobility management

• Department for Transport– Sustainable Travel Branch (also commissioned research)– Funds NBTN and provides support/contacts/links

• Green Fiscal Commission– Macro study of eco-taxation reform– Travel plans too detailed – but could set agenda for important

developments

Consultation and lobbying

• NBTN and DfT working on better information provision and uptake of tax concession measures

• Treasury/HMRC feels there is little use of existing tax concessions and reluctant to introduce more. – NBTN organising survey on this– New Government website will publicise tax concessions

Where we are at…

• Extending concessions to train fares would involve a big tax loss for little gain.

• Tax concessions need to be clear and administratively simple (concessions that need enforcement checks and could be subject to dispute are out)

• Sorting some loose ends (e.g. bike maintenance and rescue

services) would be helpful – but further personal tax concessions may not now be the priority

Employee or employer tax incentives?

• Transport Taxation Group feels that employer tax incentives are needed otherwise employee tax concessions will not be offered

• To do with getting employers to take travel plans seriously – a key issue

• Employers could have tax credit for specified travel plan expenditure

• Corporation Tax may not be best mechanism. A Business Rate rebate would affect all employers, but has not been used in this way before.

Group questions1. Which tax concessions are used by your

university/organisation?

2. Why are other tax concessions not used?

3. Has tax been a barrier to the use or effectiveness of any of your travel plan measures?

4. What tax change might get stronger support for a travel plan from your management?

Feedback on group discussion

Headlines only – keep it brief

1. Tax concessions used (and tips)

2. Why tax concessions are not used

3. Any tax barriers

4. Use of tax to get management support for a travel plan