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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: Relevant motoring expenditure exclusions - examples

Payments that do not fall within the definition of relevant motoring expenditure– Applies from 6 April 2002

Payments not made for the use of the vehicle

Expenditure which arises from journeys undertaken in the vehicle, rather than for itsuse, does not fall within the definition of relevant motoring expenditure (RME). Examplesof the kind of expenditure which arises from journeys undertaken in, rather than beingmade for use of the vehicle are car park fees (see NIM05620) ortolls. For contrast, examples of expenditure made for the use of the vehicle are standingand running costs associated with using a vehicle such as road tax, motor insurance,service costs or payments for fuel.

Where an employee is given a payment by or on behalf of their employer, to coverdepreciation, such payments are not RME. The rate at which a vehicle depreciates in valueis affected by a number of factors, most of which have nothing to do with theemployee’s use of that vehicle. Some of those factors include

  • make and model of car
  • age of car
  • mileage
  • condition
  • service history
  • modifications.

The payments for depreciation should be added to any other earnings paid in the sameearnings period for the purposes.

Payments which are made for other reasons rather than use of the vehicle

Such payments are not RME and must be added to any other earnings paid in the sameearnings period when calculating Class 1 NICs liability. A payment made to recompense anemployee for surrendering entitlement to a company car is not RME.

A payment which is clearly a round sum allowance or additional pay which bears no relationto the expenses an employee either incurs or is likely to incur is not RME. If you are notsure whether a payment is made for the use of the vehicle see NIM05845to NIM05849.

Payments made for using company cars

The NICs motoring expenses scheme does not apply to company vehicles. Therefore,payments such as mileage allowances to drivers of company cars do not fall within thedefinition of RME. For more information about the NIC liability due on mileage allowancespaid to company car or van drivers see NIM16178.

Payments or benefits in kind

Payments or benefits in kind are not RME. For example

  • an employer transfers the ownership of an asset to an employee,
  • the contractual arrangements are such that what the employee gets is a payment in kind (see NIM02193).

Payments made for private travel

Payments that meet the cost of an employee’s private travel are RME, see NIM05821.

Income tax position

None of the payments described above are mileage allowance payments. See EIM31210.