NIM06410 - Class 1 NICs : expenses and allowances: travelling expenses: non-domiciled employees working in the UK
Position from 6 April 2001 to 5 April 2004
From 6 April 2001, legislation was introduced to exclude from liability for Class 1 NICs travel expenses similar to those which are able to be excluded in respect of UK employees working abroad. See NIM06400 for details of the position regarding UK employees who are working abroad.
This aligned the NICs position of travel expenses for workers arriving from abroad to working the UK with the position in respect of UK workers who go abroad to work. It also aligned the Class 1 NICs treatment of travel expenses of non-domiciled employees who perform duties in the UK with the tax treatment allowed by virtue of section 195 of the Income and Corporation Taxes Act 1988 (ICTA 1988).
The legislation was contained in regulation 25 and paragraph 5 of Part 8 of Schedule 3 to the Social Security (Contributions) Regulations 2001.
From 6 April 2001, the following sums may be excluded when calculating earnings for the purposes of Class 1 NICs:
- the cost of journeys made by the employee between the country in which he normally lives and the UK, provided that he travels to the UK in order to perform the duties of his employment
- the cost of a maximum of 2 journeys in either direction in any tax year made by the employee’s spouse and children between the country in which the employee normally lives and the UK, provided that the journeys are made to visit or accompany him and his work keeps him in the UK for 60 days or more.
You should note, however, that the exclusion is available only for a maximum of 5 years from the date of the employee’s arrival in the UK to perform the duties of the employment.
See SE35000 for further guidance about what can be allowed under section 195 ICTA 1988. Guidance on the “60 days rule” can be found at SE35050.
Position from 6 April 2004
From 6 April 2004, the Social Security (Contributions) Regulations 2001 wereamended in recognition of the coming into force of the Income Tax (Earnings and PensionsAct) 2003 (ITEPA 2003).
Although ITEPA 2003 did not change the meaning of existing tax law, its language, construction and numbering changed. As a consequence, the NICs legislation was amended to reflect the new ITEPA 2003 provisions. The NICs exception now contained at paragraph 5 ofPart VIII of Schedule 3 disregards from earnings:
- the amount permitted as a deduction for income tax purposes under section 373 ITEPA 2003 (Non-domiciled employee’s travel costs and expenses where duties performed in UK) and section 374 ITEPA 2003 (non-domiciled employee’s spouse’s or child’s travel costs and expenses where duties performed in UK) or
- the amount that would be so permitted if the employee’s earnings were subject to tax.
The changes to paragraph 5 of Part VIII of Schedule 3 ensures that the NICs treatmentof travel costs and expenses incurred by non domiciled employees working in the UK (including the travel costs and expenses of their wives and children) corresponds to thetax treatment. The NIC provisions also mean that where the employee is not taxable but isliable to pay NICs, those expenses and costs will still be disregarded. The types of payments which can be disregarded are exactly the same as the situation prior to 5 April2004 (as outlined above).
See EIM35010 onwards for further guidance on the ITEPA 2003 sections quoted above.
Position from 6 April 2016
From 6 April 2016, the NICs disregard in paragraph 5 of Part VIII of Schedule 3 to the Social Security (Contributions) Regulations 2001 will not be available if the expenses are paid or reimbursed using a salary sacrifice arrangement, an unapproved scale rate, or as part of a round sum allowance (see NIM05015).