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HMRC internal manual

National Insurance Manual

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HM Revenue & Customs
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Class 1 NICs: Expenses and allowances: Motoring expenses (including mileage allowances) paid on or after 6.4.02: Alignment with tax on approved mileage allowance payments

Comparison between the NICs motoring expenses scheme which applies from 6 April 2002and the tax Approved Mileage Allowance Payments (AMAPs) system

For tax purposes, from 6 April 2002, there is a statutory system for taxing paymentsthat employers make to employees who carry out business travel in their own vehicles usingApproved Mileage Allowance Payments (AMAPs). For more information about the tax position,see EIM31205 onwards.

The NICs motoring expenses scheme and the AMAPs system for tax, are aligned as far aspossible. However, there are differences in the two schemes. You should not assume thatsomething that is true for one scheme is also true for the other.

Differences between the two schemes follow.

Payments of motoring expenses/mileage allowance payments

Mileage allowance payments (MAPs), for the purposes of the statutory system for tax,must be an amount paid to an employee for expenses related to the employee’s use of avehicle for business travel. They do not include payments in kind or payments made tosomeone other than the employee even if for the employee’s benefit.

For more information, about MAPS for tax purposes, see EIM31210.

Relevant motoring expenditure (RME), for the purposes of the statutory system for NICs,include MAPs but also include amounts paid to

  • another for the benefit of the employee, and
  • the employee or another for the benefit of an employee, for both private and business use of the vehicle.

RME does not include payments in kind. For more information about RME see NIM05815.

Approved mileage rates

Only one mileage rate is applied to cars and vans under the NICs motoring expensesscheme irrespective of the number of business miles travelled by the employee. The rateused is fixed at the highest rate applicable to that class of vehicle in accordance withsection 230(2) ITEPA 2003, see EIM31240.

For tax, different mileage rates apply to cars and vans for business miles travelled up to10,000 per annum than for business miles over 10,000.

Liability for NICs/Charge to tax

For NICs, employers must account for NICs liability on an earnings period basis.Amounts of motoring expenses liable for NICs are calculated and added to other earnings inthe same earnings period. They must be included in gross pay on form P11 or equivalent.

NICs liability for each pay period cannot be altered later unless an error is made at thetime of payment that relates to some past or present matter. For general information aboutrefunds of NICs paid in error, see NIM37001 onwards.

For tax, MAPs are outside of the scope of deduction of tax under PAYE so the employer canmake such payments to employees tax free. The employer records taxable MAPs at the end ofthe tax year on forms P11D, i.e. the amounts paid in excess of the approved amount.Employers can reconcile the MAPs and business mileage travelled in arrears on an annualbasis.

In addition, employees may be able to claim mileage allowance relief (MAR) against theirtax liability. There is no such corresponding relief from NICs liability.

For further information on the tax provisions relating to MAR see EIM31330.