It is still unclear how the Inland Revenue will treat fleets paying for employees' congestion charging bills and what proof it will want to show that they were incurred on business journeys, according to Alastair Kendrick, a director with Ernst & Young. If the trip is deemed to be private, employees will be liable to pay tax on the benefit-in-kind they have received.
Despite more than a year of preparation, fleets still do not know how much information they need to supply to prove that there has been no private benefit.
Kendrick said: 'The Inland Revenue has not made it clear how fleets should satisfy their requirements when it comes to claims from employees for congestion charges they incur when on company business.
'What procedures should fleets put in place to prove that a claim from an employee is a genuine one? I fear that a big business will be caught out by this. During an Inland Revenue audit, reimbursing a £5 congestion fee will be an easy picking for the Revenue to investigate. What proof will it want to show that the employee was not on private business?' Kendrick is urging fleets to introduce their own internal systems for charging claims and communicate the procedure to staff so they write down for which business purpose a journey was undertaken.
He added fleet executives should contact the Inland Revenue themselves to ensure these procedures are fail-safe and meet the Revenue's requirements.
The Inland Revenue has attempted to combat confusion with a guide which says fleets should treat employee expense claims forms for congestion charging as they do for any other claim.
Carolyn Mason, policy adviser for the Inland Revenue, said: 'We will look at how companies comply with the new tax regime in the same way as for anything else – through audit records. Employers should treat an expenses claim for congestion charging from an employee like they do for anything else.'
IR rules on congestion charging
For employees and officeholders:
Tax relief for travelling expenses is available only where the travel is in the actual performance of the duties of employment, or where it is necessary for the employee to incur the cost to perform the duties of his or her employment.
There is no tax relief for any costs relating to ordinary commuting or private travel.
For tax relief to be available for congestion charges the charge would have to have been incurred while the employee is travelling in the course of carrying out his or her job or in travelling to or from a temporary workplace. Tax relief would not be available if the congestion charge was incurred whilst commuting to or from work, or in the course of a private journey.
For employers:
Congestion charges for which tax relief is available to employees and officeholders can be included in dispensations. They can then be paid free of tax. This is possible because they are not 'mileage allowance payments', which are in relation to expenses incurred on all journeys, for example fuel. They are additional costs incurred on a particular journey but unrelated to mileage – another example is parking costs.
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