company expenses now taxable benefit

luciandan

I'd be really grateful for thoughts and advice on the following situation:

I work from home (in London) as a PAYE employee but have to travel a lot either in or through London. I agreed with the chief exec that it would be cheaper (saving approx £600 per year) and less administration for the company for me to have a travelcard. 11 months later I've just been told by the head of finance that she has registered the travelcard as a taxable benefit as I also use it for private purposes (in fact there's no way they can know whether I can use it privately, but I'm not going to lie).

Frankly, I'm disgusted that I've now been landed with an £800 tax bill for something that was hardly that much benefit to me and a saving for my employer. Is there anything I can do about it? I understand that I might be able to submit a claim to HMRC if it's wholly for business expense but how can I reasonably split it for work and non-work for the two or three times a month when I go to town at the weekend?

thanks all

jimmo

http://www.hmrc.gov.uk/manuals/eimanual/EIM16065.htm

luciandan

http://www.hmrc.gov.uk/manuals/eimanual/EIM16067.htm
Thanks - that's really helpful. So I can see that example 2 of the above page applies. Does that mean it's my responsibility to work out what the costs of individual journies were for the year after the end of the year and then supply that to HMRC?

TheCyclingProgrammer

The thing with travel cards is that they can potentially represent a BIK because like you say, you can use it at any time.

However, to ensure that businesses (and employees) are not penalised to paying for business travel in the most cost effective way, if the total cost of each single business journey (if paid for individually) exceeds the overall cost of the travel card, then the full cost of the travel card is allowable.

If the total cost of each individual journey works out as less than the cost of the travel card, then the taxable benefit is the difference between the two.

In short, the maximum potential BIK is the cost of the travel card but this can be offset by the total cost of business journeys.

The employee is entitled to a deduction under s362 equal to the lesser of

the total cost of the individual business journeys undertaken with the travel card (if paid for singly), and
the cost of the travel card.

There is a catch to all of this though. You'll notice that I've referred to "business journey" in all of the above. A business journey would normally be to attend a meeting or visit a client or any other business related journey, or travel to a "temporary workplace"; however it does not include ordinary commuting (travel from home to your only and permanent workplace).

You don't say where you're travelling to but if it's to your employers main office then it is unlikely to be deemed a temporary workplace. Relief is available for travel between two permanent bases however this relief isn't normally available if one of the places is your home; you'd have to show that your home is a permanent base and the test for this is strict:

http://www.hmrc.gov.uk/manuals/eimanual/EIM32370.htm

Generally, if you choose to work from home, then relief isn't available.

If your journeys aren't to your employers office and are visiting clients etc. then you should be able to claim relief.

HTH (IANAA btw).

TheCyclingProgrammer

luciandan wrote: »

http://www.hmrc.gov.uk/manuals/eimanual/EIM16067.htm
Thanks - that's really helpful. So I can see that example 2 of the above page applies. Does that mean it's my responsibility to work out what the costs of individual journies were for the year after the end of the year and then supply that to HMRC?

Example 2 may apply but you haven't said where you're travelling to. As I said above, if you're travelling from home to your employer's office, even if you work from home most of the time, its unlikely that you can claim tax relief on your travel.

If they are valid business journeys then yes, you need to keep a record of all journeys and the cost of each journey if paid for individually. If this is greater than or equal to the cost of the travel card you'll be able to get full relief on the cost of the travel card.

If you aren't in the self-assesment system, then you'll need to submit a Form P87.

http://search2.hmrc.gov.uk/kb5/hmrc/forms/view.page?record=lNKqI3HRKkQ&formId=769#forms