Government offers tax breaks to give workers a free ride

In what could provide a major boost for privatised bus companies, the Government is proposing that millions of workers should have free bus travel paid for by their employers.

The idea, published in an Inland Revenue consultation paper, is to extend the present principle of allowing employers to provide works buses without the subsidy being deemed a taxable benefit-in-kind.

The paper says the Government wants to foster such travel plans with the aim of reducing the number of employees commuting alone in their vehicles in order to reduce congestion and improve the environment.

The Government has received representations that many employers would prefer to subsidise an existing local bus service rather than run a bus themselves. This would level the playing field with works buses. Proponents believe it would encourage the retention and development of local bus services, available to the general public, unlike the tax relief for works buses which only benefits a company's employees.

However, the Association of Chartered Certified Accountants (ACCA) attacked the proposals because they are limited to buses rather than all public transport. "This is a very positive step forward and reflects ACCA's recent call for a transport tax credit," said Chas Roy-Chowdhury, ACCA's head of taxation. "But the proposals should not be limited to bus services only. They should be extended to the rail networks to maximise benefits to employees and businesses, as well as reduce the environmental impact of car use."

The Finance Acts 1999-2001 allowsemployers to provide a bus for transporting employees between home and the workplace without this benefit generating a tax liability. From next April the minimum size of the buses will be cut from 12 seats to nine to allow smaller companies to use minibuses.

Submissions on the paper can be made until 31 December.