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HMRC internal manual

National Insurance Manual

Class 1 NICs : Expenses and allowances : Relocation allowances : Introduction

From 1975 payments of relocation allowances were generally not subjected to NICsbecause the view which subsisted was that such payments were not earnings for the purposesof section 3(1) of the Social Security Contributions and Benefits Act 1992 (see NIM02010 for general guidance on the meaning of“earnings”).

Legal advice received in 1997 cast doubt on this stance, and it was thereforedetermined that the opportunity should be taken to align the NICs position with thetreatment of relocation allowances for tax. Legislation was introduced into what were thenthe Social Security (Contributions) Regulations 1979 (at regulation 19(1)(zc) and 19(9))to limit the exclusion from NIC liability generally only to those relocation allowanceswhich were capable of being excluded from tax.

The new provisions took effect from and including 6 April 1998. They serve to exclude fromNICs any relocation allowance which is excluded from tax.

In April 2001 the 1979 Contributions Regulations were consolidated. Regulation 19(1)(zc)and 19(9) became regulation 25 and paragraph 2 of Part VIII of Schedule 3 to the SocialSecurity (Contributions) Regulations 2001.

In April 2004 paragraph 2 of Part VIII of Schedule 3 was amended to reflect the cominginto force of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) from 6 April2003. Although the NIC provisions now reflect the language and numbering of ITEPA 2003 itis important to remember that there has been no change in the treatment of relocationallowances as a result of the April 2004 amendments.

The following guidance follows the language and numbering of ITEPA 2003 but wherenecessary the previous Income and Corporation Taxes Act 1988 numbering and terms specificto that legislation have been retained.

See the following references for specific guidance: