NIM05685 - Class 1 NICs: expenses and allowances: meal allowances
Payments in relation to attendance at permanent workplace
Cash payments or vouchers which can be redeemed either for meals or for cash must be included in gross pay when calculating earnings for Class 1 NICs purposes if they are provided in connection with attendance at a permanent workplace.
Meal vouchers which can only be redeemed for meals should not, however, be included in gross pay if they satisfy the requirements of either paragraph 5B or paragraph 6A of Part 5 of Schedule 3 to the Social Security (Contributions) Regulations 2001 (SI 2001 No 1004).
- Paragraph 5B(e) of Part 5 previously excluded from Class 1 NICs liability meal vouchers in respect of which no liability to income tax arises by virtue of section 266(3) of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003). - see NIM02431. Section 266(3) excludes meal vouchers provided for employees by an employer if the voucher can only be used to obtain anything that is exempt from tax by virtue of section 317 of ITEPA 2003. Section 317 ITEPA 2003 exempts the direct provision by employers of subsidised meals, providing certain conditions are met. See EIM 21672 for guidance on the conditions contained in section 317 ITEPA.
- Paragraph 6A of Part 5 excludes from Class 1 NICs meal vouchers to the value of 15p per working day up to a maximum of £1.05 per week - see NIM02437. This was amended from 6 April 2013 and all meal vouchers are now to be included as earnings for the purposes of calculating NICs liability.
Before 6 April 2003 this tax exemption was provided by virtue of extra statutory concession ESC A74.
Payments in connection with business travel - pre April 1998
Before the introduction of the new travel rules for tax purposes in April 1998, and the mirroring of these rules in NICs legislation, meal allowances paid in relation to travel undertaken for business purposes were excluded from Class 1 NICs by virtue of what was then regulation 19 (4) (b) of the Social Security (Contributions) Regulations 1979 (now paragraph 9 of Part 8 of Schedule 3 to the Social Security (Contributions) Regulations 2001].
They were accepted as actual business expenses because they were specific additional costs incurred in carrying out the employment. They were, however, always considered separately to the cost of the travel itself and each subsistence payment (including payments made for meals) had to be considered to determine whether it satisfied the criteria for exclusion as a specific and distinct expense incurred in carrying out the employment.
An employee living and working in Newcastle has to attend a 2 day training course in London. The employer pays an allowance to cover the cost of overnight accommodation, breakfast and an evening meal.
All subsistence costs will be excluded from NICs as necessary business expenses.
Payments in connection with business travel - from April 1998
Following the introduction in 1998 of the new travel rules for tax, regulation 19(1)(zg) was introduced into the Social Security (Contributions) Regulations 1979 with effect from 1 October 1998 to provide a specific exclusion from Class 1 NICs liability for qualifying travelling expenses. Although the legislation was not introduced until October 1998, in practice the NICs position was actually aligned with the new tax position with effect from April of that year, because liability was not pressed in relation to payments which would have satisfied the new rules if they had been able to be introduced from April 1998.
Regulation 19(1)(zg) is now paragraph 3 of Part 8 of Schedule 3 to the Social Security (Contributions) Regulations 2001.Paragraph 3 of Part 8 of Schedule 3 was subsequently amended to reflect that the travel rules for tax are now contained at sections 337 to 339 of ITEPA 2003 and now refer to travelling expenses which are ‘necessarily incurred’ rather than qualifying travelling expenses.
In accordance with the travel rules for tax the cost of business travel includes subsistence costs (including meals). From 1998, therefore, meal allowances provided in connection with necessary business travel can be excluded from Class 1 NICs in the same way as the travel itself - if the travel qualifies for exclusion as business travel then so will any subsistence payments, including the cost of meals.
See NIM06250 for general guidance regarding the travel rules.
An employee is required to work for 2 months at the site of one of his employer’s clients. They travel to the site each Monday, stay in a hotel nearby and travel home each Friday evening. When at the temporary workplace they eat all their meals in the hotel.
All subsistence costs connected with the accommodation and meals at the hotel are able to be excluded as part of the cost of the business travel.