Public transport

Our team of experts tell you what HMRC need to know if you pay employees’ public transport costs

Our experts at DSR Tax Claims know how hard it is to find good, quality information about HMRC’s tax regulations that is easy to understand, and that’s why we have created these handy guides to tell you everything you need to know. Our aim is to make life easier for our clients and that is why we want to share our expertise with you. You can also call our friendly team on 0330 122 9972 – we’re the tax experts you can trust.

What is included in public transport costs?

If you are an employer who covers your employees’ public transport costs, this might be classed as a taxable benefit to your employees. This means that you might have to report these costs to HMRC and there might be additional PAYE tax and National Insurance to deduct and pay as a result.

When referring to public transport costs, HMRC includes all the following:

  • Contributions to free or subsidised public bus transport
  • Loans made to employees with regard to buying season tickets
  • Season tickets provided for employees
  • Reimbursing the costs of season tickets to employees

Are there any exemptions?

If you are contributing to subsidised or free public bus transport, you don’t need to report these costs to HMRC and there would be no additional tax or National Insurance to pay as a result of these expenses. For example, if your company provides the finance to a local bus company to set up a free or reduced rate bus service to provide transport to your employees in their travel to and from work, this would be classed as an exemption and you wouldn’t need to report these costs on your P11D form. This allows you to provide transport for your employees without needing to operate a works bus service yourself.

If these costs form part of a salary sacrifice arrangement, you will need to report these expenses to HMRC.

How do you report to HMRC and pay?

If the public transport costs aren’t covered by an exemption, you need to report them to HMRC and there might be additional tax and National Insurance to pay depending on circumstances surrounding the transport costs. You need to report these in the following ways:

  • If you provide a season ticket to your employee (or provide any other form of public transport voucher to your employee) you need to report this cost on your P11D and then add the full cost to your employee’s other earnings and deduct Class 1 National Insurance through payroll. You don’t deduct any additional PAYE tax though.
  • If you reimburse the costs of a season ticket to your employee or cover the cost of the season ticket with a corresponding salary increase, HMRC consider this to be earnings and will need to be treated in the same way as their other earnings. This means you need to add this to their other earnings and then you will deduct and pay PAYE tax and National Insurance through payroll.
  • If you provide a loan to your employee to cover the cost of the season ticket, you need to treat this in the same way you would any other loan made to an employee – see our guide ‘Loans to employees’ for details.
  • If the public transport costs form part of a salary sacrifice arrangement and the amount of salary given up is greater than the public transport costs covered, you need to report the salary amount instead. This only applies to salary sacrifice arrangements made after 6th April 2017 – different rules applied before this date.

 

How can DSR Tax Claims help?

We aim to make life as simple as possible for our clients and that includes giving you the information you need to make your taxes (and your life) simpler and less stressful.  Our team of experts at DSR Tax Claims are always on hand to help our clients and our excellent standing with HMRC means that we can make sure you don’t fall foul of their regulations, while claiming your maximum tax relief. We can even take care of all that paperwork and deal with HMRC on your behalf too. Call our friendly team on 0330 122 9972 – we’re the tax experts you can trust.

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