|2nd April 2010
HMRC have updated their status on salary sacrifice schemes for bus passes. In summary, the HMRC's position is:
1) Any subsidy paid to the bus operator must be for the specific route used by the employee
2) The ticket must only allow travel on the specific journey used, zone/area wide tickets are not acceptable under the new guidance.
If BOTH of these conditions are not met, then the tax exemption will not apply.
Any existing schemes set up will allow employees currently with tickets, or who have signed an agreement prior to 18th December 2009 to travel under the "previous" interpretation.
Any new schemes, ticket renewals or changes to employee contracts after 18th December will be subject to the new rules.
HMRC clarification document can be downloaded here
Other ways of offering discounted bus tickets
Offering discounted bus travel is a great way to get employees interested in travelling by bus. For example, a Taster Ticket initiative whereby the employee gets a three month bus ticket but only pays for one month’s worth: the employer and bus operator pay for the other two months. Bus operators are always keen to get hold of genuine new bus users so may be willing to put this initial effort in, maybe on the condition that the employee completes a travel diary. We have been working with First and NHS Oldham on a scheme like this. Although this is a ‘taxable benefit’ for the employee, it is quite straightforward for the employer to pick up the tab as a one-off cost.
Once the taster ticket has expired, those employees who are so impressed with the convenience of travelling by bus can be offered a free or low-interest season ticket loan. HMRC’s rules allow a loan of up to £5,000 per year. There is no tax or NICs to pay provided the full amount of the loan is repaid to the employer and total loans outstanding do not exceed £5,000 at any time (obviously annual bus tickets are a lot cheaper than this at around £500-800).
So there are still ways in which employers can assist with the costs of bus travel which may actually be more straightforward than the salary sacrifice system.