01743 271071 tax@morganjones.co.uk

Working Late

If you run your own business or are a Director of a small Company (SME), the need to work late is part and parcel of your job description.

London Black Cab

Is this tax deductible

I don’t expect the tax system to make concessions for this, but I at least expect it to be even-handed.

In January, our busiest time of the year at any firms of Accountants,  it is common for me to ask members of staff to work later than usual and this can cause them problems getting home.  So, occasionally I reimburse them for the cost of a taxi without this resulting in a taxable benefit; but as I’m the boss, no one has ordered me to stay late, so if I decide to do so will the same exemption apply?

Are owners employees?

Being the owner, a director or a partner in a business doesn’t necessarily make you an employee. However you can be treated as one if you have a service contract with your company, especially if you’re a director or salaried partner. Even if you don’t have a contract, but are active in the business, you’ll still count as an employee with certain exceptions. This means the late night working travel exemption applies to all business owners. There are however a number of conditions you must meet:

  1. The exemption applies for up to 60 journeys per year
  2. You must have worked later than 9pm, Or:-
  3. Public transport has ceased or it’s not reasonable for you to use it at the time you leave work
  4. Working late isn’t a day-in, day-out regular requirement of what you do
  5. The journey is made by taxi or similar private transport

The Tax Office used to take a strict line over the last condition and expected the journey to be in a taxi, however its guidance notes do not now specify the type of transport and therefore, you could pay a friend to come and collect you. Using a friend or even a relative would allow you to pay them HMRC’s Tax and NIC tax-free Approved Mileage Allowance Payment, currently 45p per mile up to 10,000 miles per year, without any tax implication for them, but tax deductible for your business:  in other words, a win win situation.

Does an out of hours meeting count as work?

Meetings are an essential part of being a director or a partner in a business and even sole-traders can have the need to meet with senior employees outside of normal working hours. I really can’t see any reason why HMRC would argue against this, even where you adjourn to a nearby restaurant to hold the meeting and you can’t drive home because there’s a risk you may be over the drink drive limit. But remember all of the conditions must be met for the exemption to apply.

If however, you schedule meetings, say every month, with the deliberate intention that they end after 9.00pm, the cost of a taxi would not come under the exemption.

When is using public transport unreasonable?

HMRC have accepted that condition 3, the “not reasonable” requirement, is met where the level of availability/reliability of public transport might mean a journey home takes much longer than the same trip earlier in the day; so if you expect to have to stand on a wet and windy street corner for 30 minutes or more hoping a bus will arrive, get a taxi – it’s much more comfortable, with the bonus that it’s also tax-free.

 

David Jones is the Senior Partner and Founder of Morgan Jones & Company. Born in Liverpool and a graduate of Liverpool Collegiate Grammar School, David spent twenty years working for the Customs & Excise in London then Shrewsbury before starting his own business. David’s depth of knowledge of the UK tax system and his ability to communicate this learning has seen Morgan Jones & Company grow into on Shropshire’s most respected Accountancy Practice. Email David