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HMRC internal manual

National Insurance Manual

From
HM Revenue & Customs
Updated
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Class 1 NICs: Expenses and allowances: Motoring expenses (including mileage allowances) paid on or after 6.4.02: Determining whether payments are for an employee’s use of a qualifying vehicle: Background

To disregard some or the entire qualifying amount (QA) (see NIM05830)from earnings, the employer must make payments to or for the benefit of an employee whichare relevant motoring expenditure (RME) (see NIM05815). ForClass 1 NICs purposes, the employer can only deduct QA from RME, not other earnings.

Mileage allowance payments (MAPs, see EIM31205) are exempt from PAYE income tax. Theemployer, therefore, does not have to include the excess in gross pay for PAYE taxpurposes. See EIM31235.

To determine whether payments are RME may involve trying to establish whether the paymentsare made for the employee’s use of a qualifying vehicle. SeeEIM31255. If the payments are not for the employee’s use of a qualifying vehicle,they are not RME and are unlikely to be MAPs. If the payments are not RME the employermust include the payments in gross pay for Class 1 NICs. If the payments are not MAPs theemployer must include the payments in gross pay for PAYE income tax.

See

  • NIM05825 for some examples of payments that are not RME.
  • EIM31215 for some examples of payments that are not MAPs.
  • NIM05847 for guidance about establishing the facts to determine the nature of the payment
  • NIM05848 which tells you what to do once you have those facts.