NIM06365 - Class 1 NICs: Expenses and allowances: Travelling expenses: Breakdown in car sharing arrangements

Regulation 25, Paragraph 6(g) of Part V, Paragraph 8(d) of Part X of Schedule 3 to the Social Security (Contributions) Regulations 2001

Income Tax (Earnings and Pensions) Act 2003

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 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 the former Extra Statutory Concesssion ESC A66 (late night taxis and failure of car sharing arrangements) can 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 with effect from 6 April 2004 to reflect the new ITEPA 2003 provisions. The NICs exceptions are contained at paragraph 5 of Part V and paragraph 8 of Part X of Schedule 3 and 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 transport home in the event of car sharing arrangements breaking down, the provision of which would be exempt from tax by virtue of section 248 ITEPA 2003.
  • a payment in the event of car sharing arrangements breaking down which is not charged to tax by virtue of section 248 ITEPA 2003.

These changes ensured that full tax and NICs alignment on the treatment of payments and vouchers provided as a result of a breakdown in car sharing arrangements were retained.

See EIM10210 for general guidance on section 248 ITEPA.

Payments in Kind

Where car sharing arrangements breakdown and the alternatives are provided in such away as to be provided as payments in kind (for example, where the employer contracts directly with a taxi firm to provide transport home in such situations) they continue to be excluded from Class 1 NICs by virtue of paragraph 1 of Part 2 of Schedule 3 to the Social Security (Contributions) Regulations 2001 [formerly regulation 19(1)(d) of the Social Security (Contributions) Regulations 1979]. They 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).

See also NIM06360 for guidance on the NICs exclusion in respect of late night travel home.