NIM16060 - Class 1A National Insurance contributions: Special Class 1A NICs cases: Cars provided for private use: Motoring expenses connected with a car provided for private use

Paragraph 3 and 7D of Part VIII of Schedule 3 to the Social Security (Contributions) Regulations 2001 (SSCR 2001) (SI 2001 No 1004)

The method of calculating Class 1A NICs on cars provided for private use follows the method used for tax purposes, see NIM16002. This means that Class 1A NICs are payable on the cash equivalent of the car calculated in accordance with the car benefit rules of Chapter 6 of Part 3 of ITEPA 2003.

Tax treatment of motoring expenses connected with a provided car

The payment or reimbursement by an employer of motoring expenses to, or on behalf of, an employee which are incurred in connection with a provided car, do not give rise to a tax liability in addition to the tax payable under section 120 of ITEPA 2003.

This means that where an employee is taxed under section 120 of ITEPA 2003 on the provision of a company car, no further tax is charged if the employer reimburses the employee any motoring expenses incurred in connection with that car. The relevant tax legislation is section 239 of ITEPA 2003.

NICs treatment of motoring expenses connected with a company car

In cases where reimbursed expenses incurred in connection with a provided car are paid but do not attract any further tax liability than that charged under section 120 of ITEPA 2003, no Class 1 NICs liability exists. This applies whether or not the expense incurred is a business or private expense.

Expenses met by way of a non-cash voucher

If the motoring expenses are met by way of a non-cash voucher, no Class 1 NICs liability arises, see NIM02417.

Types of motoring expense

The types of motoring expenses included are those excluded under tax legislation. Although it is not possible to supply a definitive list, the following are thought to be the most common

  • servicing and/or maintenance costs, including replacements
  • road tax
  • insurance costs
  • fees/subscriptions to a motoring organisation.

There may be occasions where other types of expenses are reimbursed. Where this happens check whether the expenses are excluded from an additional tax charge under section 239 of ITEPA 2003. Where there is no additional tax liability, no Class 1 NICs are due. Where there is an additional tax liability, Class 1 NICs will be due on any expense which is not a specific and distinct business expense, see NIM05020.

Qualifying accessories for use in a provided car

Qualifying accessories which an employee purchases, for use in an employer provided car, are not treated as motoring expenses for the purposes of section 239 of ITEPA 2003. The price of any qualifying accessory is added to the list price of the car when determining the car benefit charge, see EIM23140.