Your business has relocated to premises with fewer parking spaces. You’ve rented extras in a private car park a fair walk from the office. This can count as a taxable perk for employees who use them but when does this rule apply?
Tax and parking spaces
These days the cost of parking, even in small towns, will set you back at least a few pounds per day. In bigger towns and cities the cost can be far greater. Several years ago HMRC and the government hinted that they might make all employer-paid-for parking a taxable perk. Thankfully, any plans they had were dropped and providing parking spaces for your workers isn’t taxable or liable to NI. But, as you would expect, there are limitations to this exemption.
When is parking exempt?
In essence, the law says that neither directors nor employees are taxable where an employer pays for parking “at or near” their workplace. There’s corresponding legislation which mirrors the tax exemption for NI purposes.
“At or near” the workplace
“At or near” a workplace isn’t defined in the rules but HMRC’s manual says that inspectors should allow the exemption in any case where parking is within a reasonable distance from the place of work “having regard to the nature of the locality” and not to “deny the exemption simply because there is a car park nearer to the place of work” .
Tip. Within reason you can choose a car park, say, because it’s the cheapest, even if it isn’t the nearest to your workplace, and the exemption will still apply.
Tip. The exemption applies whether you pay the provider of the parking space direct or reimburse your employee for parking fees. The exemption covers all costs employers incur in providing the parking including any charges levied by the council. However, although not expressly mentioned in the rules, the exemption doesn’t extend to parking fines.
Tip. Unlike many tax exemptions the benefit doesn’t have to be offered to all employees for it to apply. You could therefore provide exempt parking only to senior employees and directors.
What about non-business use?
The legislation doesn’t mention the tax position where there’s use of a parking space for private purposes, e.g. where used by an employee on non-working days, out of working hours or by a member of their family (who isn’t an employee of the business) at any time. HMRC’s internal manuals are also silent on this point.
Tip. The good news is that the exemption applies for all use of a parking space, not just when it’s necessary for attendance at work.
Parking further away from work?
Where you pay or reimburse a director or employee for parking that isn’t at or near their normal place of work the exemption doesn’t apply. For example, parking at a station so that the employee can catch a train to their workplace. But where the parking is necessary for business travel, e.g. an employee visiting a customer, the general exemption for business expenses applies instead.
This article has been reproduced by kind permission of Indicator – FL Memo Ltd. For details of their tax-saving products please visit www.indicator-flm.co.uk or call 01233 653500.