UK: Taxis Getting Very Taxing
An Update On HMRC´s Late Night Taxi Policy

As we reported in our August newsletter, there have been worrying developments in HM Revenue & Customs’ (HMRC) stance on tax concessions on late night taxis. We summarise the changes to HMRC’s guidelines and what they mean for firms.

In brief, for the exemption to apply the following criteria must be met.

• The employee is occasionally required to work later than usual, until at least 9pm.

• Those occasions are neither frequent nor regular.

• At the time of travel, public transport has stopped or it would be unreasonable to expect the employee to use it.

Where the above conditions are satisfied, no tax charge will arise for the first 60 journeys.

In new draft guidelines, introduced in August 2007, HMRC states that if an employee works late every night on a project, then only the taxi on the first night will be tax exempt. Also, if it is not unusual for an employee to work late at that time of year, the exemption will not apply.

This guidance is at odds with HMRC’s Employee Travel Booklet, which covers people for whom late night working is common – those employed in restaurants, or on regular call-out duty for example. The new guidelines also state that it is not necessarily enough for employers to claim that it is unsafe for employees to take public transport after 9pm.

The general consensus among the professions is that the draft guidelines are impractical and should not be applied retrospectively to any open cases. Following various representations, HMRC has agreed to produce revised draft guidance for further comment at some stage. Although there is no timetable for likely publication, HMRC’s response is welcome news.

Any firms that are being challenged on the late night taxi exemption should take these developments on board. As long as you have been applying the tests outlined above and can clearly demonstrate that you meet the criteria, any challenge should be refuted.