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HMRC internal manual

Employment Income Manual

HM Revenue & Customs
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Vouchers and credit tokens: transport vouchers: travel cards: private use and business use

The tax treatment that applies where an employer provides an employee with a travel card/oyster card depends on the circumstances of its use.

Travel card provided primarily for private use by the employee

If the travel card is provided by an employer to enable the employee to travel primarily for private purposes (e.g. ordinary commuting), the employee is provided with a benefit in the form of a transport voucher under Section 84(3) ITEPA. The cash equivalent of the benefit is the difference between the cost of providing the travel card, less any part of that cost made good by the employee to the employer (Section 87(2) ITEPA).

Travel card provided for employee only to make business journeys

If the travel card is provided to the employee only for business travel, this still represents the provision of a benefit but as the employee is entitled to a matching deduction under Section 337/338 ITEPA (by virtue of Section 362 ITEPA - see EIM16170), the cost of providing the travel card does not result in a chargeable benefit. See Example 1 in EIM16067.

Travel card provided for business journeys but available for private use

If the travel card is provided for business travel but the employee also uses it for private journeys (e.g. at weekends and/or for ordinary commuting) the provision of the travel card represents a benefit, but the extent to which that benefit is chargeable to tax and Class 1A NICs depends on the particular circumstances of its use.

If the cost of the travel card provided by the employer is matched or exceeded by the individual cost of business travel by the employee, which gives rise to a matching deduction under s362, any additional use for private purposes does not result in any additional cost to the employer. Consequently there is no chargeable benefit for the employee. See Example 2 in EIM16067.

On the other hand, if the employee makes some use of the travel card for business travel for which he or she is entitled to a deduction under s362, but the cost of these journeys does not match the cost of the benefit, a chargeable benefit arises on the difference between the two amounts.

The cost of business journeys in these circumstances is “notional” to the extent that no costs are incurred on individual journeys because the cost is covered by the travel card, but each journey has a real and identifiable cost which should be the basis for the deduction. An employee can seek a deduction for an amount that is equal to the lesser of

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

Consequently if the cost of individual journeys (if paid singly) exceeds the cost of the travel card, only the cost of the travel card can be allowed as a deduction. See Example 3 in EIM16067.