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HMRC internal manual

National Insurance Manual

Class 1 NICs: Expenses and allowances: Motoring expenses (including mileage allowances) paid on or after 6.4.02: Motoring expenses less than the qualifying amount

Relevant motoring expenditure paid less than the qualifying amount – Applies from6 April 2002

If employers pay relevant motoring expenditure (RME) to employees in an earningsperiod, the aggregate total of which is less than the qualifying amount (QA), the RME isdisregarded from earnings so no Class 1 NICs are due.

RME paid up to the QA is disregarded from earnings by paragraph 7A of Part 8 of Schedule 3to the SS(C)R 2001.

If employers only pay mileage allowance payments that are less than the approved mileagerates used for the purposes of the NIC motoring expenses scheme, no NICs liability willarise. For example, an employer pays £0.30 per mile when the approved rate is £0.40.

For more information about the approved mileage rates for NICs purposes see NIM05833.

It is worth noting that the employer cannot deduct any QA in excess of the RME paid fromother earnings paid in the same earnings period the RME was paid. Nor can the employercarry forward the QA in excess of the RME to use the next time the employer pays RME.


Employer pays salary calendar monthly at the end of each month

Employee does 1,000 business miles in April 2006

At the end of May the employer pays employee £300 (1,000 miles x £0.30 per mile)

QA 1,000 x £0.40 per mile = £400

RME – QA = -£100

Other earnings paid in May = £2,000

Earnings liable for Class 1 NICs = £2,000

QA exceeds RME so RME is not included in gross pay. Excess QA, i.e. £100, cannot be deducted from gross pay or any subsequent pay.