Income Tax (Earnings and Pensions) Act 2003

Passenger payments

233 Passenger payments

(1) No liability to income tax arises in respect of approved passenger payments made to an employee for the use of a car or van (whether or not it is a company vehicle) if—

(a) the employee receives mileage allowance payments for the use of the car or van, and

(b) the cash equivalent of the benefit of the car or van is treated as earnings from the employment by virtue of section 120 or 154 (cars and vans as benefits).

This is subject to subsection (2).

(2) The condition in subsection (1)(b) needs to be met only if the car or van is made available to the employee by reason of the employment.

(3) Passenger payments are amounts paid to an employee because, while using a car or van for business travel, the employee carries in it one or more passengers who are also employees for whom the travel is business travel.

(4) Passenger payments are approved if, or to the extent that, for a tax year, the total amount of all such payments made to the employee does not exceed the approved amount for such payments (see section 234).

(5) Section 117 (when cars and vans are made available by reason of employment) applies for the purposes of subsection (2).

234 The approved amount for passenger payments

(1) The approved amount for passenger payments is—

M × R

where—

• M is the number of miles of business travel by the employee by car or van—

  (a)

  for which the employee carries in the tax year in question one or more passengers who are also employees for whom the travel is business travel, and

  (b)

  in respect of which passenger payments are made;

• R is a rate of 5p per mile.

(2) If the employee carries for all or part of the tax year two or more passengers who are also employees for whom the travel is business travel, the approved amount for passenger payments is the total of the amounts calculated separately under subsection (1) in respect of each of those passengers.

(3) The Treasury may by regulations amend subsection (1) so as to alter the rate.