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HMRC internal manual

National Insurance Manual

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HM Revenue & Customs
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Class 1 NICs: Expenses and allowances: Working Rule agreements

For many years Inland Revenue has agreed special tax procedures for the payment of travel and lodging allowances paid in accordance with Working Rule agreements. See EIM71300 onwards, previously SE71300, for information as to what can be paid tax free.

Since 6 April 1993 the treatment of expenses for Class 1 NICs purposes has been in alignment with the tax treatment of expenses covered by a Working Rule agreement accepted as meeting the requirements for the special taxation procedures.

It follows that where travel and subsistence expenses paid under a Working Rule agreement are accepted as tax free then they will be excluded also from liability for Class 1 NICs. They will be accepted as business expenses and excluded by virtue of regulation 25 and paragraph 9 of Part 8 of Schedule 3 to the Social Security (Contributions) Regulations 2001 (SI 2001 No 1004) (before 6 April 2001 - regulation 19(4)(b) of the Social Security (Contributions) Regulations 1979). See NIM05020 for general guidance on what constitutes a business expense.