Comments from the Association of Chartered Certified Accountants
17 December 2001
We have always considered the current tax rules for public bus subsidies to be bizarre. If the Government were serious that the current relief should be widely used then it would not have been drafted so as to tax as a benefit reduced fares for a sponsoring company's employees.
Other than questions 1 and 2 we consider the information from the Inland Revenue commissioned survey should provide sufficient information to answer the other issues raised. We would be interested to see the results of the survey.
We have answered those questions for which we have information. The numbering follows that of the consultation document:
1. Subsidy Distance Restriction
We consider there should not be any restriction imposed on the maximum distance for which a business can subsidise a bus route. In our view the business is unlikely to waste money subsidising bus routes which are irrelevant to the furtherance of its activities. It follows from this that we also consider there should not be a tax and NIC exemption which is restricted by distance.
In any case we consider the suggested 10 miles limit to be too restrictive. Many employees may use more than one mode of transport in order to arrive at work and it may be that they use the bus at the start of their journey which could be much further away than 10 miles.
2. Quantum of Subsidy
There should not be a restriction to a maximum subsidy. As we have said above the business will not waste money, its expenditure will be for commercial reasons. In addition, if the payment the business can make is restricted by an amount per employee, the bus company may find it difficult to plan its services with fluctuating levels of subsidy as employment could fluctuate within the sponsoring business.
3. Benefits for Bus Services
We are not in a position to quantify the benefits. However, there is clear anecdotal evidence that there is a need in many areas for bus services to be provided with assistance. Two factors point to the subsidy requirement. Firstly bus services in many non-metropolitan areas only run every two hours or less during the day and many rural areas do not even operate every day of the week making it impossible for an employee to use the bus for going to and from work. Secondly the bus routes tend to be lengthy in order to run the bus through sufficient population clusters to make the service viable.
4. Number of Car Journeys Saved Each Year
We have no specific comments on this point.
5. What Kind of Employee Would Benefit From the Subsidy
It is difficult to be specific on who may benefit. Much depends on the location. Generally speaking however, we consider it will be those who are less well paid and cannot afford to run a car. Or whose who are part-time and therefore usually the second earner and cannot afford to run a second car. In either case there will be a likely-hood of a significant saving of car journey volumes (this also partly answers question 4 above).
6. Which kind of employers would choose to subsidise local buses
It is difficult to provide a general profile of employers who are likely to take advantage of the exemption. The most likely factors which would determine which businesses opted would range from the economic climate, and whether such a subsidy would help recruitment, to the composition of the work force as we have discussed at 4 above.
7. Are there Circumstances where the Exemption could be Unfair
We have no specific comments to this question.
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