SE21855 - Benefits: exemption for subsidies to public bus services

Section 197AB ICTA 1988

Some employers pay subsidies to public transport undertakings to assist financing a public transport road service that is useful to the employer, for instance one which stops outside the employer’s factory gate. 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 SE21850.)
• the service is available to all employees of the employer
• the employees do not get free or cheaper travel on the service because their employer has paid the subsidy, but pay the same as any member of the public using the service. (But see below for changes to this rule after 5 April 2002)

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.

An employer may pay a subsidy and get discounted season tickets for its employees. If the discount is connected with the subsidy then exemption will not be due because the employees get travel on more favourable terms than the public. If however the discount is not influenced by the subsidy, that is the bus operator would give the same discount to any group of travellers banding together to buy tickets in bulk, this will not prevent the exemption applying.

Exemption extended from 6 April 2002

From 6 April 2002 the exemption for subsidies to public bus services is extended. 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.

The definition of a "qualifying journey" is also extended to include journeys between home and work, or between places of work, that are completed only partly on a public bus. For example, an employee may drive their car to a Park and Ride (or similar scheme) stop and complete the journey by public bus.

If there is no chargeable benefit for reduced rate transport on a public bus there is no charge either under Section 141 ICTA 1988 ( SE16000) if the employee is provided with a voucher, such as a season ticket, for travel on the bus.