NIM06360 - Class 1 NICs : Expenses and allowances : Travelling expenses : Employees late night travel home
Position from 6 April 1993 to 5 April 2001
Generally, any payment which an employer makes in connection with transport for an employee’s journey between home and work is liable for both tax and NICs because itis ordinary commuting or ‘home to work’ travel.
However, until 6th April 2003, Extra Statutory Concession (ESC) A66 allowed such payments to be excluded from tax if they were paid in connection with occasional late night journeys home and certain conditions were satisfied. NICs legislation was changed with effect from 6 April 1993 to align with ESC A66 in respect of late night journeys home and from that date such payments were excluded from Class 1 NICs.
The NICs legislation provided that if an employer occasionally required an employee to work until 9pm or later and provided private transport home, then any payments made inconnection with the provision of the transport could be excluded from NICs as long as the occasions were not frequent nor regular. Late night working was not regarded as regular or frequent as long as it did not occur on more than 60 occasions in any tax year or did not follow a predictable pattern (for example, every Friday night).
Where an employer contracted with a taxi firm, or similar hire company, to provide transport for their employees any payment made to the taxi firm could be excluded from Class 1 NICs as a payment in kind by virtue of the then regulation 19(1)(d) of the Social Security (Contributions) Regulations 1979. This was applicable whether or not the journey satisfied the requirements of ESC A66.
Position from 6 April 2001 to 5 April 2004
From 6 April 2001, NICs legislation was changed in relation to late night travel home.This change was made to ensure that non-cash vouchers made available in respect of occasional late night journeys home were also excluded from Class 1 NICs if they satisfied the requirements of ESC A66.
The NICs legislation was contained in regulation 25 and in paragraph 6(g) of Part V and in paragraph 8(d) of Part X of Schedule 3 to the Social Security (Contributions) Regulations2001. This legislation fully aligned the Class 1 NICs position in respect of late night travel home with the conditions for tax exemption in ESC A66.
See NIM06365 for guidance on the NICs exclusion where car sharing arrangements break down.
Position from 6 April 2004
With effect from 6 April 2004 the Social Security (Contributions) Regulations 2001 were amended in recognition of the coming into force of Section 248 of the Income Tax (Earnings and Pensions Act) 2003 (ITEPA 2003).
Although ITEPA 2003 did not change the meaning of existing tax law the opportunity was taken, as part of the tax law rewrite commitment, to provide legislative support for tax exceptions previously provided under cover of extra statutory concessions.
Legislative cover for those items excepted from income tax by virtue of ESC A66 (late night taxis and car sharing) can now be found at section 266(1) ITEPA 2003 (exemption of non cash vouchers for exempt benefits) and section 248 ITEPA 2003 (transport home: late night working and failure of car sharing arrangements).
As a consequence the NICs legislation was amended to reflect the new ITEPA 2003 provisions. The NICs exceptions are now contained at paragraph 5 of Part V and paragraph 8 of Part X of Schedule 3 and, with effect from 6 April 2004, disregard from earnings:
- a non cash voucher which is not charged to tax by virtue of section 266(1) of ITEPA 2003 if the voucher can be used to obtain a late night taxi for a journey from the employee’s workplace to the employee’s home, the provision of which would be exempt from tax by virtue of section 248 ITEPA.
- a payment made in respect of late night transport which is not charged to tax by virtue of section 248 ITEPA 2003
These changes ensure that full tax and NICs alignment on the treatment of late night travel home is retained.
A review was undertaken during 2007 because of some inconsistencies in the way s.248 of ITEPA was being interpreted by employers, particularly the 60 journeys a year provision.Some employers considered that this enabled an employee to be provided with a taxi at least once each week, but they had failed to take account of the other elements of the condition:
- the employee is required to work later than usual and until at least 9pm (EIM21832)
- this occurs irregularly (EIM21833); and
- by the time the employee ceases work
Records should be maintained by the employer
to show that the working conditions as stipulated above are fully met and that the employee satisfies all conditions as outlined. Any employee routinely on call until 9pm or later will not satisfy the conditions. NICs, like tax, will therefore be applicable on payments made for taxis.
Payments in Kind
Where the late night transport home is provided in such a way that it is a payment in kind (for example, where the employer contracts directly with the taxi firm) this continues to be excluded from Class 1 NICs by virtue of paragraph 1 of Part II of Schedule3 to the Social Security (Contributions) Regulations 2001. It will also be excluded from Class1A NICs in accordance with the general exception from Class 1A NICs in relation to anything which is not taxable as general earnings. . (See NIM13000 for guidance regarding the general principles concerning Class 1A liability).
- either public transport has ceased, or
- it would not be reasonable to expect the employee to use public transport (EIM21834);
- and the transport is by taxi or similar road transport.