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HMRC internal manual

Employment Income Manual

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HM Revenue & Customs
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Vouchers and credit tokens: transport vouchers: travel cards: overview

See EIM16060 for general guidance on transport vouchers.

Overview

The use of travel cards to meet the cost of journeys on public transport is increasingly common. The “Oyster card” used for travel in London is an example. In the following guidance, “business travel” means -

  • travel in the performance of an employee’s duties (Section 337 ITEPA 2003 - see EIM32350 onwards), or
  • travel to a temporary workplace (Section 338 ITEPA 2003 - see EIM32000 onwards).

Employee purchases ticket and is reimbursed by employer

When an employee meets costs necessarily incurred on business travel, the employee is entitled to a deduction under s337 or s338 for the amount expended. If an employee purchases a ticket and is subsequently reimbursed by the employer, the reimbursement is strictly taxable under Section 70 ITEPA (EIM20601) but as this amount is matched by the cost he incurred, which entitles him or her to a deduction of an equivalent amount there are no tax consequences for the employee. In these circumstances the employer may seek a dispensation for such expenses (EIM30050).

Employer provides employee with ticket

If an employer provides an employee with a ticket for a single business journey which the employee is required to make, the cost of the ticket represents a benefit to the employee. But as the cost is matched in full by the deduction to which the employee is entitled under s337/338 (by virtue of Section 362 ITEPA - see EIM16170), there are no tax consequences for the employee.

Employer provides employee with travel card

However, if the employer purchases a travel card for an employee to use on public transport, the card gives the holder the right to unlimited travel during a specified period. Neither the employer nor the employee incurs any costs on individual journeys because the costs are covered by the travel card.

The provision of the travel card represents a benefit to the employee but if neither employer nor employee incurs any cost in respect of individual journeys, it might seem that no deduction is due under s362. This would leave the employee chargeable to a benefit equivalent to the full cost of the travel card. But this is not necessarily so.

The employee is entitled to a deduction under s362 equal to the lesser of

  • the total cost of the individual business journeys undertaken with the travel card (if paid for singly), and
  • the cost of the travel card.

This ensures that the employee is not penalised simply because the employer has chosen to pay for his/her business travel in the most economical way.

For more information on travel cards see EIM16066 and for Oyster cards see EIM16068. There are some examples at EIM16067.

As regards cases where employees pay for a travel card out of their own pocket, without reimbursement by their employer, see EIM31833.