EIM21855 – Particular benefits: exemption for subsidies to public bus services

Section 243 ITEPA 2003

Some employers pay subsidies to public transport undertakings to assist in financing a public transport road service that is useful to the employer, for instance one that stops outside the employer's factory gate.

The subsidy may be paid direct to a bus operator or to some other body such as a Transport Executive Authority, which then distributes the money to operators. There is no seating requirement size for the vehicle used for providing the service. The service must be a public one though; that is it must be open to anyone, whether employee or not, who wishes to use it.

No taxable benefit arises to employees from such a subsidy provided that:

• the employees use the service at least partly for qualifying journeys ("qualifying journeys" means the same as for the works bus exemption at EIM21850 and the definition also includes journeys between home and work, or between workplaces, that are completed only partly on a bus. For example, an employee may drive a car to a Park and Ride (or similar scheme) pick-up point and complete the journey by public transport)
• the service is available to all employees of the employer.

No tax or NICs charge arises when an employee is provided with free or reduced rate transport because his employer subsidises the service. The exemption is limited to local bus services (as defined in the 1985 Transport Act) that have regular stops along their route.

An employer may pay a subsidy and get discounted season tickets for its employees. If there is no chargeable benefit for reduced rate transport on a public bus there is no charge either under Part 3 Chapter 4 ITEPA 2003 (see EIM16000) if the employee is provided with a voucher, such as a season ticket, for travel on the bus.