NIM06370 - Class 1 NICs: Expenses and allowances: Travelling expenses: Disruption to public transport

From 6 April 2004

With effect from 6 April 2004 the Social Security (Contributions) Regulations 2001 were amended in recognition of the coming into force of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003).

Although ITEPA 2003 did not change the meaning of existing tax law, the opportunity was taken, as part of the tax law rewrite commitment, to provide legislative support for tax exceptions 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 found at section 245 ITEPA 2003 (Travelling and subsistence during public transport strikes) and section 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 reflect the new ITEPA 2003 provisions. The NICs exceptions are contained at paragraph 5B(a) of Part 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 and subsistence 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 the conditions for tax exemption in section 245 ITEPA 2003. This is in keeping with the general exclusion from Class 1A NICs of any benefit which is not charged to tax as general earnings. (See NIM13000 for guidance on the general principles regarding liability for Class 1A NICs.)