Author: Dave Beattie
The service that Uber offers is no longer regarded as a private travel option – companies often allow their employees to use the service for business trips. In organisations where employees do not have their own vehicles, this is an effective solution to ferry employees to and from clients, training sessions, and suppliers. What then is the tax implication of the employer paying for such a service?
The use of an Uber for business travel is not considered a fringe benefit, provided the trip is exclusively for business purposes and is handled correctly. The critical distinction lies between a legitimate business expense and a personal benefit.
Business travel versus fringe benefit
- A business expense covers costs incurred for the sole purpose of earning income, providing a service, or performing a business function. If your employer pays for a trip from the office to a client’s premises or place of business transaction, or to and from an airport for a business trip, it’s considered a legitimate business travel expense. These costs can be reimbursed tax-free if the employee provides adequate documentation. The use of a company Uber account is a good practice because there is the automatic provision of the travel details and associated costs. All that would be required is the sign-off by the employer that the trip was business-related.
- A taxable fringe benefit, on the other hand, is a non-cash reward provided to an employee for their private or domestic use. For example, if an employer pays for your Uber commute to and from your regular workplace, this is typically considered a personal expense and therefore a taxable fringe benefit. SARS would enquire about the nature of such trips during an audit.
Conditions for tax-free reimbursement
To ensure that an Uber ride is treated as a tax-free business expense, an employee must follow these guidelines under an employer’s policy:
- The expense must be for a legitimate business purpose.
- The employee must provide an adequate record of the expense to their employer within a reasonable time. An Uber invoice would be ideal.
- If an employee is given an advance/ float prior to travel, any excess above the legitimate spend must be returned to the employer in a reasonable time. Ideally the transaction should be against a bank card so that advances aren’t necessary.
- It would be good practice to have an Uber usage policy in writing.
A well drafted Uber policy, clear operating instructions, and good management oversight is all that’s needed to make this a viable business travel option.
Email the HRTorQue team today for any tax-related query.