Green travel allowances

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 bus must have a minimum of nine seats, 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 are after work, provided the main use remains commuting and transport between workplaces. Capital allowances would be available on the purchase of the minibus.

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.

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 5% to 35% of the list price. Emissions for petrol driven cars from 1 to 75 g/km are taxed at 5% and from 76-94g/km, at 10% of list price.

Cars running solely on diesel fuel are currently subject to a 3% supplement. Special rules apply to cars running on electricity. Employees and directors who are provided with a company car that is propelled solely by electricity will not have to pay tax on the benefit until 2015.

Cars with higher levels of CO2 emission are taxed on a graduated scale rising to a maximum (for both petrol and diesel) of 35% of the car's price. The detailed figures are shown in our taxable benefits table. These figures apply to all company cars, including second cars.

Zero-emission vehicles and low-emission cars

For the five year period from 6 April 2010 to 5 April 2015 cars with an emission figure of 75g/km or less will have a 0% benefit. This includes electric and hydrogen propelled vehicles.