Andrea Scatchard
Let’s face it: getting to work these days is putting a serious dent in most people’s pockets, whether they are just commuting to work or required to do work related travel in their job.
Fast rising fuel costs are the main contributor, and employers may be considering (or being asked) how they can help their employees out, as well as how to keep company costs down.
While there are lots of factors to consider with all options, tax will naturally play a part in any decision making.
Fuel prices rise. Photo: Engin Akyurt: pexels.com
Public transport – employers can help staff by subsidising public transport costs and generally wont pay FBT or PAYE on the subsidy. Salary sacrificing is also an option to keep overall costs down for the employer.
On the (regional) buses. Photo: Michael Jeans
Biking to work – if employees are keen on commuting to work by bike or scooter, employers can often fund the purchase of bikes or scooters without needing to pay FBT. As these can be bigger ticket items, employers may prefer that the employee funds the cost and it is common to use a salary sacrifice scheme to reduce the employee’s before tax pay. There are a number of providers in the market offering these schemes.
Cyclists in Cambridge
Car pooling – this might be an option where employees live in close proximity to each other. If employers want to sweeten the deal by providing carparks or some form of reimbursement they will need to consider whether this can be done tax free. Smaller employers may be able to provide petrol vouchers tax free if they fall under the de minimis threshold for unclassified benefits.
Employer provided transport – it is not unheard of for employers to provide park and ride type services for employees, especially where the workplace is remote or not well served by public transport. This could be a fringe benefit to the employees so needs careful review.
Mileage reimbursement – staff may be more inclined to claim reimbursement for work related travel given the increased costs, so employers should be aware of both the allowed IR mileage rates and the other options that are available for working out tax free reimbursement amounts. These other options may allow a higher tax free reimbursement than the current IR rates. Inland Revenue generally releases their annual mileage rates around May each year so we should be seeing an update soon – although they calculate these based on historic data which would not really reflect the current fuel pricing increases, we have asked whether a prospective rate could be issued.
Travel allowances – while travel from home to work is generally treated as private, there are some limited situations where reimbursements can be made tax free.
If you are looking at supporting your employees, a chat with your accountant or tax adviser will help brainstorm the pros and cons of the options so you can make a fully informed decision.
Fuel prices rise. Photo: Engin Akyurt: pexels.com
