(1) This Part contains—
(a) earnings-only exemptions, and
(b) employment income exemptions.
(2) In this Act “earnings-only exemption” means an exemption from income tax which—
(a) prevents liability to tax arising in respect of earnings, either by virtue of one or more particular provisions (such as a Chapter of the benefits code) or at all, and
(b) does not prevent liability to tax arising in respect of other employment income.
(3) In this Act “employment income exemption” means an exemption from income tax which prevents liability to tax arising in respect of employment income of any kind at all.
(4) The following provisions in Part 7 also confer exemption from liability to income tax in respect of earnings—
(a) section 426 (conditional interests in shares: no charge in respect of acquisition of employee’s interest in certain circumstances),
(b) section 474 (share options: no charge in respect of receipt of shorter- term option),
(c) sections 489 to 493 and sections 496 to 499 (approved share incentive plans),
(d) section 518 (approved SAYE option schemes: no charge in respect of receipt of option),
(e) section 519 (approved SAYE option schemes: no charge in respect of exercise of option),
(f) section 523 (approved CSOP schemes: no charge in respect of receipt of option),
(g) section 524 (approved CSOP schemes: no charge in respect of exercise of option),
(h) section 528 (enterprise management incentives: no charge on receipt of qualifying option),
(i) section 542 (priority share allocations: exemption where offer made to public and employees), and
(j) section 544 (priority share allocations: exemption where different offers made to public and employees).
(1) The exemptions conferred by the provisions specified in subsection (2) prevent liability to income tax arising under any enactment, but the other exemptions in this Part only affect liability to income tax under Part 2 of this Act.
(2) The provisions referred to in subsection (1) are—
(a) section 245 (travelling and subsistence during public transport strikes),
(b) section 248 (transport home: late night working and failure of car-sharing arrangements),
(c) section 264 (annual parties and functions),
(d) Chapter 8 of this Part (exemptions for special kinds of employees) except for sections 290 and 291,
(e) section 323 (long service awards),
(f) section 324 (small gifts from third parties), and
(g) section 326 (expenses incidental to transfer of a kind not normally met by transferor).
(1) No liability to income tax arises in respect of approved mileage allowance payments for a vehicle to which this Chapter applies (see section 235).
(2) Mileage allowance payments are amounts, other than passenger payments (see section 233), paid to an employee for expenses related to the employee’s use of such a vehicle for business travel (see section 236(1)).
(3) Mileage allowance payments are approved if, or to the extent that, for a tax year, the total amount of all such payments made to the employee for the kind of vehicle in question does not exceed the approved amount for such payments applicable to that kind of vehicle (see section 230).
(4) Subsection (1) does not apply if—
(a) the employee is a passenger in the vehicle, or
(b) the vehicle is a company vehicle (see section 236(2)).
(1) The approved amount for mileage allowance payments that is applicable to a kind of vehicle is—
M × R
where—
M is the number of miles of business travel by the employee (other than as a passenger) using that kind of vehicle in the tax year in question;
R is the rate applicable to that kind of vehicle.
(2) The rates applicable are as follows—
| Kind of vehicle | Rate per mile |
|---|---|
| Car or van | 40p for the first 10,000 miles |
| 25p after that | |
| Motor cycle | 24p |
| Cycle | 20p |
(3) The reference in subsection (2) to “the first 10,000 miles” is to the total number of miles of business travel in relation to the employment, or any associated employment, by car or van in the tax year in question.
(4) One employment is associated with another if—
(a) the employer is the same;
(b) the employers are partnerships or bodies and an individual or another partnership or body has control over both of them; or
(c) the employers are associated companies within the meaning of section 416 of ICTA.
(5) In subsection (4)(b)—
(a) “control”, in relation to a body corporate or partnership, has the meaning given by section 840 of ICTA (in accordance with section 719 of this Act), and
(b) the definition of “control” in that section of that Act applies (with the necessary modifications) in relation to an unincorporated association as it applies in relation to a body corporate.
(6) The Treasury may by regulations amend subsection (2) so as to alter the rates or rate bands.
(1) An employee is entitled to mileage allowance relief for a tax year—
(a) if the employee uses a vehicle to which this Chapter applies for business travel, and
(b) the total amount of all mileage allowance payments, if any, made to the employee for the kind of vehicle in question for the tax year is less than the approved amount for such payments applicable to that kind of vehicle.
(2) The amount of mileage allowance relief to which an employee is entitled for a tax year is the difference between—
(a) the total amount of all mileage allowance payments, if any, made to the employee for the kind of vehicle in question, and
(b) the approved amount for such payments applicable to that kind of vehicle.
(3) Subsection (1) does not apply if—
(a) the employee is a passenger in the vehicle, or
(b) the vehicle is a company vehicle.
(1) A deduction is allowed for mileage allowance relief to which an employee is entitled for a tax year.
(2) If any of the employee’s earnings—
(a) are taxable earnings in the tax year in which the employee receives them, and
(b) are not also taxable earnings in that year that fall within subsection (3),
the relief is allowed as a deduction from those earnings in calculating net taxable earnings in the year.
(3) If any of the employee’s earnings are taxable earnings in the tax year in which the employee remits them to the United Kingdom, there may be deducted from those earnings the amount of any mileage allowance relief—
(a) for that tax year, and
(b) for any earlier tax year in which the employee was resident in the United Kingdom,
which, on the assumptions mentioned in subsection (4), would have been deductible under subsection (2).
(4) The assumptions are—
(a) that subsection (2)(b) does not apply, and
(b) where applicable, that the earnings constitute taxable earnings in the tax year in which the employee receives them.
(5) Subsection (3) applies only to the extent that the mileage allowance relief cannot be deducted under subsection (2).
(6) A deduction shall not be made twice, whether under subsection (2) or (3), in respect of the same mileage allowance relief.
(7) In this section “taxable earnings” or “net taxable earnings” means taxable earnings or net taxable earnings from the employment for the purposes of Part 2.
(1) No liability to income tax arises in respect of approved passenger payments made to an employee for the use of a car or van (whether or not it is a company vehicle) if—
(a) the employee receives mileage allowance payments for the use of the car or van, and
(b) the cash equivalent of the benefit of the car or van is treated as earnings from the employment by virtue of section 120 or 154 (cars and vans as benefits).
This is subject to subsection (2).
(2) The condition in subsection (1)(b) needs to be met only if the car or van is made available to the employee by reason of the employment.
(3) Passenger payments are amounts paid to an employee because, while using a car or van for business travel, the employee carries in it one or more passengers who are also employees for whom the travel is business travel.
(4) Passenger payments are approved if, or to the extent that, for a tax year, the total amount of all such payments made to the employee does not exceed the approved amount for such payments (see section 234).
(5) Section 117 (when cars and vans are made available by reason of employment) applies for the purposes of subsection (2).
(1) The approved amount for passenger payments is—
M × R
where—
M is the number of miles of business travel by the employee by car or van—
(a) for which the employee carries in the tax year in question one or more passengers who are also employees for whom the travel is business travel, and
(b) in respect of which passenger payments are made;
R is a rate of 5p per mile.
(2) If the employee carries for all or part of the tax year two or more passengers who are also employees for whom the travel is business travel, the approved amount for passenger payments is the total of the amounts calculated separately under subsection (1) in respect of each of those passengers.
(3) The Treasury may by regulations amend subsection (1) so as to alter the rate.
(1) This Chapter applies to cars, vans, motor cycles and cycles.
(2) “Car” means a mechanically propelled road vehicle which is not—
(a) a goods vehicle,
(b) a motor cycle, or
(c) a vehicle of a type not commonly used as a private vehicle and unsuitable to be so used.
(3) “Van” means a mechanically propelled road vehicle which—
(a) is a goods vehicle, and
(b) has a design weight not exceeding 3,500 kilograms,
and which is not a motor cycle.
(4) “Motor cycle” has the meaning given by section 185(1) of the Road Traffic Act 1988 (c. 52).
(5) “Cycle” has the meaning given by section 192(1) of that Act.
(6) In this section—
“design weight” means the weight which a vehicle is designed or adapted not to exceed when in normal use and travelling on a road laden;
“goods vehicle” means a vehicle of a construction primarily suited for the conveyance of goods or burden of any description.
(1) In this Chapter—
“business travel” means travelling the expenses of which, if incurred and paid by the employee in question, would (if this Chapter did not apply) be deductible under sections 337 to 342;
“mileage allowance payments” has the meaning given by section 229(2);
“passenger payments” has the meaning given by section 233(3).
(2) For the purposes of this Chapter a vehicle is a “company vehicle” in a tax year if in that year—
(a) the vehicle is made available to the employee by reason of the employment and is not available for the employee’s private use, or
(b) the cash equivalent of the benefit of the vehicle is to be treated as the employee’s earnings for the tax year by virtue of—
(i) section 120 (benefit of car treated as earnings),
(ii) section 154 (benefit of van treated as earnings), or
(iii) section 203 (residual liability to charge: benefit treated as earnings), or
(c) in the case of a car or van, the cash equivalent of the benefit of the car or van would be required to be so treated if sections 167 and 168 (exceptions for pooled cars and vans) did not apply, or
(d) in the case of a cycle, the cash equivalent of the benefit of the cycle would be required to be treated as the employee’s earnings for the tax year under Chapter 10 of Part 3 (taxable benefits: residual liability to charge) if section 244(1) (exception for cycles made available) did not apply.
(3) Sections 117 and 118 (when cars and vans are made available by reason of employment and are made available for private use) apply for the purposes of subsection (2).
(1) No liability to income tax arises by virtue of Chapter 10 of Part 3 (taxable benefits: residual liability to charge) in respect of the provision of workplace parking for an employee.
(2) No liability to income tax arises by virtue of the payment or reimbursement of expenses incurred in connection with the provision for or the use by an employee of workplace parking.
(3) In this section “workplace parking” means—
(a) a car parking space,
(b) a motor cycle parking space, or
(c) facilities for parking a cycle other than a motor cycle,
at or near the employee’s workplace.
(1) No liability to income tax arises where a heavy goods vehicle is made available to an employee for the employee’s private use if conditions A and B are met.
(2) Condition A is that there is no transfer of the property in the vehicle to the employee.
(3) Condition B is that the employee’s use of the vehicle in the tax year is not wholly or mainly private use.
(4) In this section—
“heavy goods vehicle” means a mechanically propelled road vehicle which—
is of a construction primarily suited for the conveyance of goods or burden of any kind, and
is designed or adapted to have a maximum weight exceeding 3,500 kilograms when in normal use and travelling on a road laden, and
“private use” means use other than for travel which the employee is necessarily obliged to do in the performance of the duties of the employment.
(1) No liability to income tax arises in respect of the discharge of any liability of an employee in connection with a taxable car or van or an exempt heavy goods vehicle.
(2) No liability to income tax arises in respect of a payment to an employee in respect of expenses incurred by the employee in connection with a taxable car or van or an exempt heavy goods vehicle.
(3) Subsections (1) and (2) do not apply to liability arising by virtue of section 149 (benefit of car fuel treated as earnings).
(4) No liability to income tax arises by virtue of Chapter 10 of Part 3 (taxable benefits: residual liability to charge) in respect of a benefit connected with a taxable car or van or an exempt heavy goods vehicle.
(5) Subsection (4) does not apply to the provision of a driver.
(6) For the purposes of this section a car or van is “taxable” if under Chapter 6 of Part 3 the cash equivalent of the benefit of it is to be treated as the employee’s earnings for the tax year.
(7) For the purposes of this section—
(a) “heavy goods vehicle” has the same meaning as in section 238(4) (modest private use of heavy goods vehicles), and
(b) a heavy goods vehicle is “exempt” if it is made available in the tax year to the employee in such circumstances that section 238 applies.
(8) For the purposes of subsections (1) and (2), a heavy goods vehicle is also “exempt” if it is so made available in such circumstances that section 238 would apply if the employee were not in excluded employment.
(9) In this Part “excluded employment” means an excluded employment within the meaning of the benefits code (see section 63(4)).
(1) No liability to income tax arises in respect of a sum if or to the extent that it is paid wholly and exclusively for the purpose of paying or reimbursing expenses which—
(a) are incidental to the employee’s absence from the place where the employee normally lives,
(b) relate to a continuous period of such absence in relation to which the overnight stay conditions are met (a “qualifying period”), and
(c) would not be deductible under Part 5 if the employee incurred and paid them and Chapter 2 of this Part (mileage allowances and passenger payments) did not apply.
(2) No liability to income tax arises by virtue of Chapter 10 of Part 3 (taxable benefits: residual liability to charge) in respect of a benefit provided for an employee if—
(a) its provision is incidental to such an absence during a qualifying period, and
(b) no amount would be deductible in respect of it under Part 5.
(3) Subsections (1) and (2) are subject to section 241 (incidental overnight expenses and benefits: overall exemption limit).
(4) The overnight stay conditions are that—
(a) the employee is obliged to stay away from the place where the employee normally lives throughout the period,
(b) the period includes at least one overnight stay away from that place, and
(c) each such overnight stay during the period is at a place the expenses of travelling to which meet condition A or B.
(5) Condition A is that the expenses are deductible under Part 5 (otherwise than under any of the excepted foreign travel provisions) or would be if the employee incurred and paid them and Chapter 2 of this Part did not apply.
(6) Condition B is that the expenses are within section 250 or 255 (exemption of work-related and individual learning account training provision) or would be if the employer paid or reimbursed them.
(7) In this section “excepted foreign travel provisions” means—
(a) section 371 (travel costs and expenses where duties performed abroad: visiting spouse’s or child’s travel),
(b) section 374 (non-domiciled employee’s spouse’s or child’s travel costs and expenses where duties performed in UK), and
(c) section 376 (foreign accommodation and subsistence costs and expenses (overseas employments)).
(1) Section 240(1) and (2) do not apply if the exemption provisions total in respect of the qualifying period in question exceeds the permitted amount.
(2) In this section “the exemption provisions total”, in respect of a period, means the aggregate of—
(a) the amounts that would be exempted under section 240(1) and (2) in respect of the period, apart from this section, and
(b) the amounts that would be exempted under section 268 (exemption of vouchers and tokens for incidental overnight expenses) in respect of the period, apart from the condition in section 268(5).
(3) In this section “the permitted amount”, in respect of a period, means the aggregate of the following amounts—
(a) £5 for each night during the period spent wholly in the United Kingdom, and
(b) £10 for each night during the period spent wholly or partly outside the United Kingdom.
(1) No liability to income tax arises in respect of the provision for employees of a works transport service if—
(a) the service is available generally to employees of the employer (or each employer) concerned,
(b) the main use of the service is for qualifying journeys by those employees, and
(c) the service—
(i) is used only by the employees for whom it is provided or their children, or
(ii) is substantially used only by those employees or children.
(2) In this section—
“children” includes stepchildren and illegitimate children but does not include children aged 18 or over, and
“works transport service” means a service which is provided by means of a bus or a minibus for conveying employees of one or more employers on qualifying journeys.
(3) For the purposes of this section—
(a) “bus” means a road passenger vehicle which has a seating capacity of 12 or more, and
(b) “minibus” means a vehicle constructed or adapted for the carriage of passengers which has a seating capacity of 9, 10 or 11.
(4) But a vehicle which falls within the definition in subsection (3)(b) is not a minibus for the purposes of this section if—
(a) it has one or more disqualified seats, and
(b) excluding the disqualified seats, it has a seating capacity of 8 or less.
(5) For the purposes of subsections (3) and (4) the seating capacity of a vehicle is determined in the same way as for the purposes of Part 3 of Schedule 1 to VERA 1994 (vehicle excise duty on buses).
This applies whether or not the vehicle is a bus within the meaning of that Part of that Schedule.
(6) For the purposes of subsection (4) a seat is disqualified if relevant construction and use requirements are not met in relation to it.
In this subsection “construction and use requirements” has the same meaning as in Part 2 of the Road Traffic Act 1988 (c. 52) or, in Northern Ireland, Part III of the Road Traffic (Northern Ireland) Order 1995 (S.I. 1995/2994 (N.I. 18)).
(1) No liability to income tax arises in respect of the provision of financial or other support for a public transport road service if—
(a) in the case of a local bus service, conditions A and B are met, or
(b) in any other case, conditions A to C are met.
(2) Condition A is that the service is used by employees of one or more employers for qualifying journeys.
(3) Condition B is that the service is available generally to employees of the employer (or each employer) concerned.
(4) Condition C is that the terms on which the service is available to the employees of the employer (or each employer) concerned are not more favourable than those available to other passengers.
(5) In this section—
“local bus service” means a local service (as defined in section 2 of the Transport Act 1985 (c. 67)), and
“public transport road service” means a public passenger transport service provided by means of a road vehicle.
(1) No liability to income tax arises by virtue of Chapter 10 of Part 3 (taxable benefits: residual liability to charge) in respect of the provision for an employee of a cycle or cyclist’s safety equipment if conditions A to C are met.
(2) Condition A is that there is no transfer of the property in the cycle or equipment in question.
(3) Condition B is that the employee uses the cycle or equipment in question mainly for qualifying journeys.
(4) Condition C is that cycles are available generally to employees of the employer concerned or, as the case may be, cyclist’s safety equipment is so available to them.
(5) In this section “cycle” has the meaning given by section 192(1) of the Road Traffic Act 1988 (c. 52), and “cyclist” has a corresponding meaning.
(1) No liability to income tax arises in respect of the following benefits and payments where a strike or other industrial action disrupts a public transport service normally used by an employee.
(2) They are—
(a) the provision for the employee of overnight accommodation at or near the employee’s permanent workplace,
(b) a payment to the employee in respect of expenses incurred by the employee in connection with such accommodation,
(c) the provision for the employee of transport for the purpose of ordinary commuting or travel between any two places that is for practical purposes substantially ordinary commuting, and
(d) a payment to the employee in respect of expenses incurred on such transport.
(1) No liability to income tax arises in respect of—
(a) the provision of transport for a disabled employee, or
(b) the payment or reimbursement of expenses incurred on such transport,
if the condition in subsection (2) is met.
(2) The condition is that the transport is provided or the expenses are incurred for the purpose of ordinary commuting or travel between any two places that is for practical purposes substantially ordinary commuting.
(3) Subsection (1) does not apply in a case where a car is made available to a disabled employee (but see section 247).
(4) In this section “disabled employee” means an employee who has a physical or mental impairment with a substantial and long-term adverse effect on the employee’s ability to carry out normal day to day activities.
(1) This section applies where a car is made available to a disabled employee without any transfer of the property in it.
(2) No liability to income tax arises by virtue of Chapter 6 or 10 of Part 3 (taxable benefits: cars, vans etc. and residual liability to charge) in respect of the benefit if conditions A to C are met.
(3) No liability to income tax arises in respect of—
(a) the provision of fuel for the car, or
(b) the payment or reimbursement of expenses incurred in connection with it,
if conditions A to C are met.
(4) Condition A is that the car has been adapted for the employee’s special needs or, in the case of an employee who because of disability can only drive a car that has automatic transmission, it is such a car.