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HMRC internal manual

Employment Income Manual

Particular benefits: exemption for works buses

Section 242 ITEPA 2003 and S.I.2002 No.205

The benefit of a works bus service is exempted from tax if the following conditions are satisfied:

  • The service is provided to transport employees on “qualifying journeys” that are
  • Between home and a workplace. This can include journeys that are completed only partly on a works bus, for example, an employee may drive a car to a pick-up point and complete the journey by works bus. It can also include journeys between workplaces.
  • It can also include journeys that do not strictly fall within the definition of “qualifying journeys” such as a journey made on a working day between the workplace and shops or other amenities where the distance is no more than 10 miles one-way (20 miles return journey). This is intended to provide access to town centre amenities for employees, typically but not exclusively during a lunch break, without the need for them to use private cars. The journey must take place on a normal working day, so the exemption does not apply to an employee who uses the service on a day when they are not at work.
  • the service is available to employees generally of the employer, whether or not all those employees use the service or find it convenient to do so,
  • the main use of the service is for qualifying journeys by the employees,
  • the use of the service is nearly all by employees and their children. Minor occasional use by other people will not disqualify exemption, provided it is not a substantial part of the use of the service,
  • the vehicle used to provide the works bus service is either:

    • a bus that has a seating capacity of twelve passengers (that is thirteen with the driver) or more, or
    • a minibus that has a seating capacity of nine passengers or more.

The exemption applies whether the employer owns the bus itself or hires it on contract from a bus operator.

Two or more employers may band together to provide a works bus service. That will be exempt if the conditions are all satisfied looking at the employees of each employer together.

Note that children riding in the bus to get to school, or employees occasionally using the service to go shopping rather than get to work, will not disqualify relief so long as the “main use” test is met. Note also that the exemption relates to the bus service not to the bus itself. So if an employer uses a bus both to run a works bus service and to take the employees on an office outing to Blackpool, the works bus service may be exempt and the office outing a taxable benefit. The annual value and running expenses of the bus would need to be apportioned fairly between the two to arrive at the cash equivalent of the benefit of the office outing.

Services in a vehicle not available to employees generally, for instance services confined to directors or senior employees, remain a taxable benefit.