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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: The qualifying amount - Identifying the business miles travelled

Identifying the business miles travelled for the purposes of calculating thequalifying amount – applies from 6 April 2002; regulation 22A(4) of the SocialSecurity (Contributions) Regulations 2001

The rules about what constitute business mileage are the same for both tax and NICs.Guidance on what is qualifying business travel is contained at NIM06240onwards.

Employers must not include business mileage they anticipate their employees will travel inany calculation of the qualifying amount (QA). Only business mileage the employee hasactually travelled may be included.

The QA is the product of the formula “M x R”. For more information about themeaning of “R” see NIM05833.

“M” is the sum of

  • the number of miles of business travel undertaken, at or before the time when relevant motoring expenditure (RME) is paid

 

 

  • in respect of which the RME is paid, and
  • in respect of which no other payment has been made;

and

  • the number of miles of business travel undertaken

 

 

  • since the last payment of RME was made, or, if there has been no such payment, since the employment began, and
  • for which no payment has been, or is to be, made.

So, there are two stages to calculating “M”, i.e. the number of businessmiles travelled.

Stage 1 - Business miles for which the employer has made payment

To determine the number of business miles to use when calculating the QA, the employermay include the number of business miles undertaken at, or before, the time he makes thepayment of RME, providing

  • they are business miles which have been travelled in relation to the payment being made; and
  • there has been no other payment already paid in relation to those business miles.

Stage 2 - Business miles for which the employer has not, nor will, make a payment

When the employer makes a payment of motoring expenses, he may include the number ofbusiness miles undertaken, for which he has not made, nor will he make, any paymentproviding

  • they are business miles, which the employee has travelled since the last payment of RME was paid; or if there has been no such payment,
  • they are business miles, which the employee has travelled since the employment began.

Explanation relating to the business miles referred to at stage 2

Stage 2 refers to business miles the employee has travelled but for which the employerwill not pay motoring expenses. There may be a number of circumstances where this mighthappen. For example, some employers may reduce the number of business miles for which theypay motoring expenses by the normal home to workplace mileage travelled by the employee.

The fact that employers do not pay motoring expenses for some business travel does notprevent the employer including those ‘non-reimbursed’ miles in the calculationfor the QA. However, an employer can only include ‘non-reimbursed’ miles in thecalculation that the employee has travelled since the last payment of RME.

Therefore, it is necessary that, to take advantage of these miles when calculating the QA,the employer must account for all available ‘non-reimbursed’ miles travelled bythe employee each time they pay motoring expenses. If he fails to do so the employer

  • cannot carry the ‘non-reimbursed’ miles forward to use in any subsequent calculation of a QA
  • cannot re-open a closed pay period at some later date if he discovers later that there were some ‘non-reimbursed’ miles he could have used to calculate the QA.

For more information about the meaning of the QA see NIM05830.