There is also a different exemption for the occasional taxi home provided by an employer, but it is important to remember how both of these work and that there can be problems if you try to combine them.
Taxis Home
If an employee is required to work late, he may have problems getting home if he relies on public transport (some would say you don’t have to work late to have problems with public transport, but there is no tax exemption for that) and if the detailed rules are met, paying for a taxi home for him will not be a taxable benefit.
There is also an exemption where employees have a car-sharing arrangement and this arrangement fails for some reason, such as a mechanical breakdown or illness.
Late Working
In order to qualify for this exemption, the employee must have been required to work later than usual, and also later than 9pm. If by the time he goes home public transport has ceased, or if “it would not be reasonable to expect the employee to use it” (which would certainly cover the situation around where I live after 9pm), then the employer can pay for a taxi without there being a taxable benefit.
It is also a condition that such situations only “occur irregularly” and there is an overriding limit of under 60 such journeys a year for any employee – I must say, if I had to work until after 9pm on 59 occasions a year, I would think it was happening with depressing “regularity”, but the point of the rule is that the exemption is not available if, for example, an employee in a night club works late every Friday night even though the total number of journeys will be less than 60 in the year.
Car Sharing
If employees regularly share a car to get to work and this arrangement fails “because of unforeseen and exceptional circumstances”, then again a taxi can be provided with no tax charge. Note that in this situation the exemption applies whether or not it is after 9pm, and whether or not the employees have had to work late.
The same limit of fewer than 60 journeys applies here – though if I shared a car to work with someone and it broke down 59 times, I think I would be starting to “foresee” that it might do so again!
Staff Parties
The “late night taxi” exemption only applies to situations where the employee has been required to work late, so it would not apply to a journey home by taxi from a staff party.
There is a separate exemption for the cost of staff parties, which exempts them from tax provided the annual cost per head is less than £150 – so if spouses or boy/girlfriends are invited the cost limit is £300 per couple.
There is a trap for the unwary here. The exemption for the staff party refers to the cost of the party itself and “any transport provided for persons attending it”. If your staff party is close to the £150 per head limit (or if you give several such parties and the combined total is getting near £150), then paying for a taxi (or, for example, a minibus) home for some or all of the staff could take you over the limit and make the whole cost of the party concerned a taxable benefit, because the exemption for taxis home does not apply to a journey home from a staff party.
In the case of car sharing arrangements, I suppose it could be claimed that paying for a taxi home because the car sharers had overindulged at the staff party and were unfit to drive was an “unforeseen and exceptional circumstance”, but even in the season of goodwill, I wouldn’t like to argue that one with the inspector!
