HMRC provides guidance on the taxation of air miles and similar benefitsMonday, August 15th, 2011
When employees obtain air miles or other rewards when they pay for business travel and subsistence is there a benefit that must be reported for tax purposes by the employer?
Prompted, no doubt, by extensive recent discussion on the Linkedin website, HMRC has clarified the tax status of air miles, petrol tokens, credit card points etc acquired by employees when they pay for business travel.
The subject has also been discussed on the Payroll-Help Forum and our response has always been that there is only a P11D reporting requirement if the employer has incurred a cost in providing the benefit. HMRC has now added a page to its Employment Income Manual (link below) clarifying the tax position.
HMRC’s view is that, as long as air miles, petrol tokens, credit card points, etc (which we will generalise as “scheme rewards”) are acquired on buying goods and services in the same way as any other member of the general public, there is no tax liability. Such scheme rewards are not treated as being provided by reason of the employment as long as they belong to the employee rather than the employer, even though they are acquired because the employee has paid for business travel and subsistence or has used a business credit card.
For example, an employee has to travel on business from London to Aberdeen and, in the same way as any member of the public, books a flight online and pays using a credit card that provides air miles. The employer subsequently reimburses the cost incurred by the employee. There is no reporting requirement on the employer, or on the employee under self-assessment, or on the third-party supplier of the air miles.
However, if the scheme rewards are obtained by the employer and made available to employees by reason of the employment, there is certainly a reportable benefit. For example, an employer purchases a block of air miles and issues them to employees as incentives. Or, a business arranges for a third party to provide scheme rewards to its employees but not to customers in general.