NIM05802 - Class 1 NICs: expenses and allowances: motoring expenses (including mileage allowances) paid on or after 6 April 2002: main features of the NICs motoring expenses scheme

A list of the main features of the NICs motoring expenses scheme

The main features of the scheme, which applies from 6 April 2002, are:

  • the changes are statutory and introduced by the Social Security (Contributions) (Amendments) Regulations 2002, SI 2000 No 307, which amend the SS(C)R 2001 (SI 2001 No 1004)
  • the amendment regulations introduce new regulation 22A, new paragraphs 7A, 7B and 7C of Part 8 of Schedule 3 and amend paragraph 9 of Part 8 of schedule 3 to the SS(C)R 2001
  • Regulation 22A(1) treats as earnings amounts paid for motoring expenses which are not earnings under section 3(1) of the SSCBA 1992, which exceed a prescribed maximum defined as the qualifying amount
  • Regulation 22A(2) provides the method to determine whether the prescribed maximum has been exceeded
  • Regulation 22A(3) defines relevant motoring expenditure (RME) for the purposes of the NICs motoring expenses scheme. Payments of RME are the only payments from which the qualifying amount can be deducted. RME does not include payments in kind. If there is no RME or the qualifying amount exceeds the RME, the amount that can be disregarded from earnings is limited to the RME paid.
  • Regulation 22A(4) provides the method to calculate the qualifying amount by reference to:
    • all business miles travelled by the employee, irrespective of whether the employer has withheld payment for some of the business miles travelled, and
    • the mileage rate, applicable to the type of vehicle, which is set out in section 230(2) ITEPA 2003, see EIM31240
  • Paragraph 7A of Part 8 of Schedule 3 to the SSCR 2001 ensures that payments for motoring expenses, which are earnings under section 3(1) of the SSCBA 1992, are disregarded from the calculation of earnings liable for Class 1 NICs up to a prescribed maximum, the qualifying amount
  • Paragraph 7A(1) switches off the disregard where the payment is made through Optional Remuneration Arrangements - this means that if you salary sacrifice for RME then there is no employer or employee NICs disregard and NICs will be due on the full amount
  • Paragraph 7B of Part 8 of Schedule 3 to the SSCR 2001 provides that mileage allowance payments made to employees in respect of a cycle, (see EIM31240) which are earnings under section 3(1) of the SSCBA 1992, are disregarded from the calculation of earnings liable for Class 1 NICs up to a prescribed maximum, the qualifying amount
  • Paragraph 7C of Part 8 of Schedule 3 to the SSCR 2001 provides that passenger payments:
    • paid to employees who carry passengers in their privately owned vehicles whilst undertaking business travel, and
    • which are earnings under section 3(1) of the SSCBA 1992

are disregarded from the calculation of earnings liable for Class 1 NICs up to a prescribed maximum, the qualifying amount.

  • Paragraph 9(2) of Part 8 of schedule 3 applies a restriction on the normal business expenses rule, see NIM05708. The restriction applies to relevant motoring expenditure defined in regulation 22A(3) of the SSCR 2001, see NIM05815. Amounts up to the statutory prescribed maximum, the qualifying amount, are disregarded from the calculation of earnings liable for Class 1 NICs. Amounts above the prescribed maximum are not disregarded.