Expenses and benefits: congestion and clean air zone charges
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1. Overview
If you’re an employer who covers the costs of congestion or clean air zone charges for your employees, there are rules you must follow about:
- tax
- National Insurance
- reporting
Different rules apply depending on whether the employee used a company vehicle or their own car, and whether they were travelling on business or not.
Business travel
Travelling on business means that the employee either travels as part of their job (for example, for meetings) or needs to go to a temporary workplace.
2. What's exempt
You do not have to report or pay anything to HM Revenue and Customs (HMRC) if the employee is driving in a company vehicle.
Salary sacrifice arrangements
You do have to report charges if the employee is driving a company vehicle for private purpose as part of a salary sacrifice arrangement.
3. What to report and pay
If congestion or clean air zone charges are not exempt, you must report them to HM Revenue and Customs (HMRC). You may also have to deduct and pay tax and National Insurance on them.
The amount you report is the amount paid in congestion or clean air zone charges.
Some congestion or clean air zone charges are covered by exemptions (which have replaced dispensations). This means you will not have to include them in your end-of-year reports.
If the employee is using their own vehicle to travel on business
You do not have to:
- report the cost
- deduct or pay any National Insurance or tax on the charges
If you pay the charges directly for an employee’s private travel
If you make the payment before the employee is charged, you must:
- report the cost on form P11D
- pay Class 1A National Insurance on the amount paid in charges
If you make the payment after the employee is charged, this counts as earnings so you must:
- add the cost to your employee’s other earnings
- deduct and pay Class 1 National Insurance and PAYE tax through payroll
If you reimburse the charges for an employee’s private travel
This counts as earnings so you must:
- add the cost to your employee’s other earnings
- deduct and pay Class 1 National Insurance and PAYE tax through payroll
Salary sacrifice arrangements
If the cost of the charges is less than the amount of salary given up, report the salary amount instead.
4. Technical guidance
The following guide contains more detailed information: