There are a number of schemes intended to encourage employers to make arrangements for their staff to travel to work by more environmentally beneficial means. These include the following:

• Cycle schemes
• Works bus service
• Business travel
• Company cars

Cycle schemes

Employers may provide employees with free bicycles (on loan) and related safety equipment to be used mainly for the purpose of cycling to work.

The exemption extends to the provision of a secure parking arrangement for bicycles and the provision of showers for those cycling to work.

At the end of the life of the bicycle, the employee can retain it provided he pays the estimated market value of it at that time.

Capital allowances would normally be available to the employer on the purchase of the bicycles and equipment.

Works bus service

This scheme is designed to allow employers to provide tax free home to work travel by bus service. There are two ways of organising the arrangements. 

Minibus or bus provided by the employer

The employer may provide a bus service for staff, but this must be available to all staff.

The minibus must have a minimum of nine seats, or a minimum of 12 seats for a bus, and can be used for home to work travel. The main use of the bus must be by employees (and their children), but the bus may also be used to transport staff to a nearby shopping facility at lunchtimes or after work, provided the main use remains commuting and transport between workplaces.

Capital allowances would be available on the purchase of the minibus or bus.

Subsidised public bus services

The employer may instead subsidise public bus services used by employees.

The facility to travel by subsidised public transport (which is limited to road transport) must be available to all staff, and must be a local bus service.

The subsidy may be provided through the purchase of season tickets which are given to staff.

Business travel

Payments for travel for business journeys by bicycle provided by the employee can be made at a rate of 20p per mile but not in relation to home to work journeys.

Employers can also encourage staff to car share on business journeys by making tax free payments of up to 5p per mile for each passenger for whom the journey is qualifying business travel.

A pool car provided for staff to use on business journeys is not taxable as a benefit in kind, and can be used to ensure that staff use economical and environmentally friendly transport where public transport is not available or appropriate.

Company cars

Cars emitting CO2 at a specified level are taxed on rates varying from 0% to 37% of the list price. The rate used is also now determined on whether the car was registered pre or post 6 April 2020. Electric cars have zero emissions and the relevant rate for 2021/22 is 0%, thus providing a tax-free benefit.

Cars running solely on diesel fuel are currently subject to a 4% supplement up to a maximum of 37%, unless RDE2-compliant.

Diesel plug-in hybrids are classed as alternative fuel vehicles so are also not subject to 4% supplement.