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HMRC internal manual

National Insurance Manual

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Class 1 NICs : Expenses and allowances : Travelling expenses : Workers on offshore oil and gas rigs and platforms

Legislation to 5 April 2001

With effect from 6 April 1996 certain expenses paid to workers on offshore oil and gasrigs or platforms who are transferred to and from the mainland were excluded fromliability for Class 1 NICs. This provided alignment with the tax treatment then affordedby Extra Statutory Concession (ESC) A65.

The relevant NICs legislation at that time was regulation 19(1)(v) of the Social Security(Contributions) Regulations 1979 but this has now been consolidated as paragraph 6 of PartVIII of Schedule 3 to the Social Security (Contributions) Regulations 2001.

Effect of the exclusion

Workers on offshore oil and gas rigs have to travel between the mainland and the rig.The employer (or sometimes a third party) usually pays for this or provides the transport.This does not attract a liability for Class 1 NICs.

On occasions the timing of the transport to the rig may mean that the employee has to stayovernight on the mainland close to the departure point. If the employer pays for orreimburses the cost of accommodation and subsistence these can also be excluded fromliability for Class 1 NICs.

Where the employer actually provides the transport or accommodation this is excluded fromClass 1 NICs liability as a payment in kind.

Although Class 1A NICs were extended to most benefits in kind from 6 April 2000 travel andsubsistence costs associated with travel between oil and gas rigs and the mainland werespecifically excluded if they satisfied the requirements of ESC A65 for exemption fromtax. Regulation 40(7)(j) of the Social Security (Contributions) Regulations 2001 applied.(See NIM13000 for guidance on the general principles for Class1A NICs.)

Change in legislation from 6 April 2001

The exclusion available in respect of travel between the mainland and oil and gas rigswas extended with effect from 6 April 2001 also to non-cash vouchers which satisfy theconditions for tax exemption in ESC A65. This means that from that date, there will be noliability for NICs on any costs which satisfy the requirements of ESC A65 no matter howthe travel or accommodation is arranged.

See SE67190 for guidance on the application of ESC A65.

Changes in legislation 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 A65 (Workerson offshore oil and gas rigs or platforms: free transfers from or to mainland) can now befound at section 305 ITEPA 2003 (Offshore oil and gas workers: mainland transfers).

As a consequence the NICs legislation was amended with effect from 6 April 2004 so as toreflect the new ITEPA 2003 provision. The NICs exceptions are now contained at paragraph6(b) of Part V and paragraph 6 of Part VIII of Schedule 3. The NIC provisions disregardfrom earnings:

  • a non cash voucher which can be used to obtain travel etc. to or from an offshore oil or gas instillation, the provision of which would be exempt from tax under section 305 ITEPA 2003
  • a payment made in respect of travel etc. to or from an offshore oil or gas instillation which is not charged to tax by virtue of section 305 ITEPA 2003.

The changes ensure full tax and NICs alignment on the treatment of travel andsubsistence payments (including vouchers) for mainland transfers in respect of offshoreoil and gas workers.

See EIM34110 for general guidance on section 305 ITEPA 2003.

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 305 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 general principlesregarding liability for Class 1A NICs.)