Putting the tax into taxis

HMRC has drawn up complex new guidelines that could slap income tax on late-night taxis home for lawyers and support staff, as first revealed on www.thelawyer.com (11 January).

The taxi bill, normally paid for by firms or passed on to clients, could spiral by up to 67 per cent.

This case has aroused much passion. HMRC was not willing to comment on a reader’s comment that it was “bringing itself into disrepute”, but did point out that it was not the law but only its guidance that had changed.

Nevertheless, the guidance is making partners across the City sweat for fear of seven-figure tax bills. It could also be complex to the point of being unworkable.

Here’s HMRC’s helpful clarification: “It is not unreasonable that HMRC may require the employer to justify [that a taxi journey is tax exempt] and provide evidence regarding the nature of the journeys.”

Translation: a firm has to prove, inter alia, that a late-night journey home by public transport is unsafe.

Look out for City firms snapping up properties in Clapton to save on visiting associates’ taxi bills.