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. Such subsidies may count as financial or other support for the purposes of the exemption in section 243 if they are made in relation to a specific identified bus route or numbered bus service (such as a ring and ride) that meets the criteria below. But in order to count as financial or other support for this purpose, any subsidy (or other support) must be sufficient to constitute genuine support for the particular service in question. A payment that relates to local services in general will not meet this test.

If the sum in question is paid to a body other than the bus operator, such as a Transport Executive Authority, then it will be important to ensure both that the money does constitute support for a specific identified bus route or numbered service and that the Authority in question distributes the money to the relevant bus operator. (Seek advice from PSN if the Authority in question is Transport for London as its status in relation to the operation of buses is different to that of regional Transport Executive Authorities).

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. This is limited to the particular bus route or numbered service for which the employer has provided financial or other support. 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. But the season ticket in question must be limited to the particular bus route or numbered service for which the employer has provided financial or other support. A bus pass that covers the network of routes in a local area or zone will not meet the terms of the exemption.

Bus pass salary sacrifice arrangements

Some employers have offered bus pass salary sacrifice arrangements to their employees that are intended to take advantage of the exemption in section 243 ITEPA 2003. Unless these arrangements satisfy all of the conditions outlined above, they will fail to qualify for the exemption in section 243.