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HMRC internal manual

National Insurance Manual

HM Revenue & Customs
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Class 1 NICs : Expenses and allowances : Travelling expenses : Employees late night travel home

Position from 6 April 1993 to 5 April 2001

Generally, any payment which an employer makes in connection with transport for anemployee’s journey between home and work is liable for both tax and NICs because itis ordinary commuting or ‘home to work’ travel.

However, until 6th April 2003, Extra Statutory Concession (ESC) A66 allowed such paymentsto be excluded from tax if they were paid in connection with occasional late nightjourneys home and certain conditions were satisfied. NICs legislation was changed witheffect from 6 April 1993 to align with ESC A66 in respect of late night journeys home andfrom that date such payments were excluded from Class 1 NICs.

The NICs legislation provided that if an employer occasionally required an employee towork until 9pm or later and provided private transport home, then any payments made inconnection with the provision of the transport could be excluded from NICs as long as theoccasions were not frequent nor regular. Late night working was not regarded as regular orfrequent as long as it did not occur on more than 60 occasions in any tax year or did notfollow a predictable pattern (for example, every Friday night).

Where an employer contracted with a taxi firm, or similar hire company, to providetransport for their employees any payment made to the taxi firm could be excluded fromClass 1 NICs as a payment in kind by virtue of the then regulation 19(1)(d) of the SocialSecurity (Contributions) Regulations 1979. This was applicable whether or not the journeysatisfied the requirements of ESC A66.

Position from 6 April 2001 to 5 April 2004

From 6 April 2001, NICs legislation was changed in relation to late night travel home.This change was made to ensure that non-cash vouchers made available in respect ofoccasional late night journeys home were also excluded from Class 1 NICs if they satisfiedthe requirements of ESC A66.

The NICs legislation was contained in regulation 25 and in paragraph 6(g) of Part V and inparagraph 8(d) of Part X of Schedule 3 to the Social Security (Contributions) Regulations2001. This legislation fully aligned the Class 1 NICs position in respect of late nighttravel home with the conditions for tax exemption in ESC A66.

See SE10210 for general guidance on the application of ESC A66 and see NIM06365 for guidance on the NICs exclusion where car sharingarrangements break down.

Position from 6 April 2004

With effect from 6 April 2004 the Social Security (Contributions) Regulations 2001 wereamended in recognition of the coming into force of Section 248 of the Income Tax (Earningsand Pensions Act) 2003 (ITEPA 2003).

Although ITEPA 2003 did not change the meaning of existing tax law the opportunity wastaken, as part of the tax law rewrite commitment, to provide legislative support for taxexceptions previously provided under cover of extra statutory concessions.

Legislative cover for those items excepted from income tax by virtue of ESC A66 (latenight taxis and car sharing) can now be found at section 266(1) ITEPA 2003 (exemption ofnon cash vouchers for exempt benefits) and section 248 ITEPA 2003 (transport home: latenight working and failure of car sharing arrangements).

As a consequence the NICs legislation was amended to reflect the new ITEPA 2003provisions. The NICs exceptions are now contained at paragraph 5 of Part V and paragraph 8of Part X of Schedule 3 and, with effect from 6 April 2004, disregard from earnings:

  • a non cash voucher which is not charged to tax by virtue of section 266(1) of ITEPA 2003 if the voucher can be used to obtain a late night taxi for a journey from the employee’s workplace to the employee’s home, the provision of which would be exempt from tax by virtue of section 248 ITEPA.
  • a payment made in respect of late night transport which is not charged to tax by virtue of section 248 ITEPA 2003

These changes ensure that full tax and NICs alignment on the treatment of late nighttravel home is retained.

A review was undertaken during 2007 because of some inconsistencies in the way s.248 ofITEPA was being interpreted by employers, particularly the 60 journeys a year provision.Some employers considered that this enabled an employee to be provided with a taxi atleast once each week, but they had failed to take account of the other elements of thecondition:

  1. the employee is required to work later than usual and until at least 9pm (EIM21832)

  2. this occurs irregularly (EIM21833); and

  3. by the time the employee ceases work

  • either public transport has ceased, or
  • it would not be reasonable to expect the employee to use public transport (EIM21834); and
  1. the transport is by taxi or similar road transport.

Records should be maintained by the employer

to show that the working conditions as stipulated above are fully met and that theemployee satisfies all conditions as outlined. Any employee routinely on call until 9pm orlater will not satisfy the conditions. NICs, like tax, will therefore be applicable onpayments made for taxis.

Payments in Kind

Where the late night transport home is provided in such a way that it is a payment inkind (for example, where the employer contracts directly with the taxi firm) thiscontinues to be excluded from Class 1 NICs by virtue of paragraph 1 of Part II of Schedule3 to the Social Security (Contributions) Regulations 2001 [formerly regulation 19(1)(d) ofthe Social Security (Contributions) Regulations 1979]. It will also be excluded from Class1A NICs in accordance with the general exception from Class 1A NICs in relation toanything which is not taxable as general earnings. . (See NIM13000 forguidance regarding the general principles concerning Class 1A liability).