Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

National Insurance Manual

From
HM Revenue & Customs
Updated
, see all updates

Class 1 NICs: Expenses and allowances: Mileage allowances: Rules before 6 April 2002: Employer restricts the amount of business mileage paid - examples

Example 1 – Employer’s mileage rate exceeds authorised rate and businessmiles travelled multiplied by authorised mileage rate is more than business miles paidmultiplied by employer’s mileage rate

Mr Smith’s employer pays a mileage rate of £0.70 a mile for business journeys. Hecalculates the amount to pay by comparing the cost of the journey from Mr Smith’shome to the place where he is required to attend the business meeting, with what it wouldhave cost if Mr Smith’s journey had started and finished at his normal workplace. TheInland Revenue’s Authorised Mileage (AMR) rate for Mr Smith’s car is £0.45 permile.

Mr Smith drives straight from home to the business meeting which is 20 miles away. Fromthere he goes 8 miles to his normal office (making his total business travel for themeeting 28 miles) and finally returns home, a distance of 15 miles.

Applying the “lesser of” rule, Mr Smith’s employer pays him £11.20 (16miles x £0.70) for the journey. That is, for the 16 miles round trip between his normaloffice and the meeting.

The amount of NICs due on the mileage rate of £0.70 is calculated as follows:

  • Payment made = 16 miles x £0.70 = £11.20
  • AMR allowed = 28 miles x £0.45 = £12.60
  • No NICs are due on the payment Mr Smith receives because the AMR allowed exceeds the payment made. This is despite the fact that the employer pays a mileage allowance per mile that exceeds the AMR.

Example 2 - Employer’s mileage rate exceeds authorised rate and business milestravelled multiplied by authorised mileage rate is less than business miles paidmultiplied by employer’s mileage rate

Mrs Jones’ employer pays a mileage rate of £0.70 a mile for business journeys. Hecalculates the amount to pay by comparing the cost of the journey from Mrs Jones’home to her temporary work place with what it would have cost if Mrs Jones had started andfinished at her normal workplace. The AMR for Mrs Jones car is £0.45 per mile.

Mrs Jones drives straight from home to her temporary workplace which is 30 miles away andreturns home without calling at her normal office. The whole journey is therefore businesstravel. The temporary workplace is 22 miles from her normal office.

Applying the “lesser of” rule, Mrs Jones’ employer pays her £30.80 for thejourney (44 miles x £0.70). That is, for the 44 mile round trip between her normal officeand temporary workplace, because this is less than the 60 miles she actually travelled.

The amount of NICs due on the mileage rate of £0.70 is calculated as follows:

  • Payment made = 44 miles x £0.70 = £30.80
  • AMR allowed = 60 miles x £0.45 = £27.00
  • NICs are due on £30.80 - £27.00 = £3.80