NIM05865 - Class 1 NICs: Expenses and allowances: Motoring expenses (including mileage allowances) paid on or after 6.4.02: Non motorised cycles

Employees using their privately owned cycles for business travel – Paragraph 7B of Part 8 of Schedule 3 to the Social Security (Contributions) Regulations 2001 

Introduction

Some employers pay expenses to employees who use their own cycles for business purposes.

For the definition of a cycle, see section 192(1) of the Road Traffic Act 1988. The definition refers to any bicycle, tricycle or cycle with four or more wheels that is not amotor vehicle.

Qualifying amounts free from liability for Class 1 NICs

Paragraph 7B allows for the disregard from earnings of the qualifying amount (QA) of a mileage allowance payment (MAP) in respect of a cycle. There is no Class 1 NICs liability on the QA disregarded from earnings.

The approved mileage rate for cycles which is used to calculate the qualifying amount is provided by section 230(2) ITEPA 2003. For a list of the approved mileage rates for the different classes of vehicle including cycles, see EIM31240.

The meaning of “Mileage allowance payment” is in section 229(2) of ITEPA 2003,see EIM31210.

The method for calculating Class 1 NICs liability

To calculate the Class 1 NICs due on the mileage allowance payments paid to employees who use their own cycle for business travels follow the steps below.

Step 1

Identify the total amount of MAPs paid for the use of a privately owned cycle.

Step 2

Identify the QA. See NIM05830 which explains how to calculate the QA.

Step 3

Calculate the excess of MAPs over the QA, if any.

Step 4

Add the excess to other earnings in the same earnings period the employer paid the MAPS.Calculate the Class 1 NICs due as normal.

Any amount by which QA exceeds RME is lost. It cannot be set against other earnings in the earnings period, or carried forward to the next earnings period.