Budget2011: End of taxi tax relief will hit City employers

DITCHING TAX RELIEF on cabs home will bring in millions of pounds from the employers of City workers.

The government will ditch 43 reliefs flagged up by the Office of Tax Simplification in their review of simplifying the tax system.

Abolishing late night taxis tax relief will hit the pockets of employers, warned A&M Taxand senior director Coin Keane. The withdrawal will hit much harder than other high-profile relief withdrawals such as those for luncheon vouchers and provision of meals to staff who bike into work.

“While the cyclists, breakfasts and luncheon vouchers reliefs aren’t widely used, not involving significant sums, the potential withdrawal of home-to-office taxis could be a significant cost to many businesses,” said Keane.

“Although strictly, the provision of a taxi home when an employee has worked late would be a benefit on the individual, employers would nearly always pay the tax on the employees’ behalf.”

It is believed that HMRC was unhappy that the taxi tax relief was being abused in the City to provide its workers with the maximum tax-free benefit.

The government intends to abolish the reliefs in the Finance Bill 2012 after a period of consultation.

“Although the Revenue has tightened the rules around this exemption in recent years, it is likely that employers will continue to provide this benefit to their employees while meeting the tax on their behalf,” said Graham Farquhar employment tax partner at Ernst and Young.

“For a £30 taxi fare the tax cost will be around £13 for a basic rate tax payer rising to around £38 for the highest earners.”


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