Archives >

Congestion Charging

If you live in or around London, you will surely be familiar with the congestion charge by now. If you live further away, you need to be aware of it if you visit. You pay £5 for driving your car within a particular area in central London during a set part of any weekday. You can avoid the charge by arriving early and leaving late, or by staying out of the zone, or by only coming into the centre at weekends.

What if you commute by car to central London, and your employer pays the charge for you? Because the charge is the legal liability of the car's owner, there is a strange result. If the car belongs to the employee, there is a tax charge as if the employee was paid the cash. Home to work is not a business journey, and paying a bill is treated like a payment of salary, not a benefit in kind.

If it's a company car, then there is no extra charge to tax. All costs of using the car for private purposes are already covered by the scale charge based on the list price of the car - servicing, insurance, tax disc, congestion charge.

If you use any car on a business journey to London - one on which the employer can pay mileage allowances free of tax - then the payment of the congestion charge would also be an allowable expense, and wouldn't give rise to a tax charge on the employee.

This point is written up in Accountancy, April 2003 p111.