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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 : Disruption to public transport

Position from 6 April 1993 to 5 April 2001

With effect from 6 April 1993 legislation was introduced to align the NICs treatmentwith the tax treatment in respect of travel and subsistence costs incurred by an employeeas a result of disruption to public transport caused by a strike or other industrialaction.

Until 6 4 2003, the tax position was covered by Extra Statutory Concession (ESC) A58. Thisprovided for any reasonable amounts paid by an employer in respect of additional traveland subsistence costs incurred by an employee as a result of industrial action to beexcluded from tax. Regulation 19(1)(o) of the Social Security (Contributions) Regulations1979 provided for similar amounts to be excluded from Class 1 NICs from 6 April 1993.

Position from 6 April 2001 to 5 April 2004

The NICs exclusion was extended with effect from 6 April 2001 to non-cash voucherswhich satisfied the conditions for tax exemption in ESC A58. This meant that from thatdate, there was no liability for Class 1 NICs on any additional travelling and subsistencecosts incurred as a result of industrial action no matter how the travel or accommodationwas arranged.

If the employer maked the arrangements for the accommodation or the travel directly withthe hotel, etc. there was no liability for Class 1 NICs because in meeting the cost theemployer was making a payment in kind. This was excluded from Class 1 NICs by virtue ofparagraph 1 of Part II of Schedule 3 to the Social Security (Contributions) Regulations2001 [formerly regulation 19(1)(d) of the Social Security (Contributions) Regulations1979].

See SE10100 for guidance on the application of ESC A58

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 the Income Tax (Earnings and PensionsAct) 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 A58(Travelling and subsistence allowances when public transport disrupted) can now be foundat section 245 ITEPA 2003 (Travelling and subsistence during public transport strikes) andsection 266(3) ITEPA 2003 (Exemption of non cash vouchers for exempt benefits).

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

  • a non cash voucher which is not charged to tax by virtue of section 266(3) of ITEPA 2003 if the voucher can be used in respect of additional travel and subsistance costs which would be exempt from tax under section 245 ITEPA 2003
  • a payment made in respect of additional travel and subsistence costs caused by a disruption to public transport which is not charged to tax by virtue of section 245 ITEPA 2003.

The changes ensure full tax and NICs alignment on the treatment of travel andsubsistence payments (including vouchers) where public transport is disrupted.

See EIM10100 for general guidance on section 245 ITEPA.

Payments in Kind

Although Class 1A NICs were extended to cover most benefits in kind from 6 April 2000,there is no liability for Class 1A NICs on any payment in kind which satisfies theconditions for tax exemption in section 245 ITEPA 2003. This is in keeping with thegeneral exclusion from Class 1A NICs of any benefit which is not charged to tax as generalearnings. . (See NIM13000 for guidance on the generalprinciples regarding liability for Class 1A NICs.)