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HMRC internal manual

National Insurance Manual

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Class 1A National Insurance contributions: Special Class 1A NICs cases: Cars provided for private use: Motoring expenses connected with a car provided for private use

Paragraph 7 and 7D Part 8, Schedule 3 SS(C)R 2001; Paragraph 4, Part 5, Schedule 3 SS(C)R 2001 The method of calculating Class 1A NICs on cars provided for private use follows the method used for tax purposes, see

NIM16002. This means that Class 1A NICs are payable on the cash equivalent of the car calculated in accordance with the car benefit rules of Chapter 6 of Part 3 of ITEPA 2003 (before 6 April 2003 - section 157 and Schedule 6 ICTA 1988).

Tax treatment of motoring expenses connected with a provided carThe payment or reimbursement by an employer of motoring expenses to, or on behalf of, an employee which are incurred in connection with a provided car, do not give rise to a tax liability in addition to the tax payable under section 120 of ITEPA 2003 (before 6 April 2003 - section 157 of ICTA 1988). An exception to this is the cost of a chauffeur, see EIM23007 (before 6 April 2003 – SE23007).

This means that where an employee is taxed under section 120 of ITEPA 2003 (before 6 April 2003 – section 157 of ICTA 1988) on the provision of a company car, no further tax is charged if the employer reimburses the employee any motoring expenses incurred in connection with that car. The relevant tax legislation is section 239 of ITEPA 2003, see EIM23005 (before 6 April 2003 – section 157(3) of ICTA 1988, see SE23005).

NICs treatment of motoring expenses connected with a company carIn cases where reimbursed expenses incurred in connection with a provided car are paid but do not attract any further tax liability than that charged under section 120 of ITEPA 2003 (section 157 of ICTA 1988), no Class 1 NICs liability exists. This applies whether or not the expense incurred is a business or private expense.

Expenses met by way of a non-cash voucherIf the motoring expenses are met by way of a non-cash voucher, no Class 1 NICs liability arises, see

NIM02417.

Types of motoring expenseThe types of motoring expenses included are those excluded under tax legislation. Although it is not possible to supply a definitive list, the following are thought to be the most common

  • servicing and/or maintenance costs, including replacements
  • road tax
  • insurance costs
  • fees/subscriptions to a motoring organisation.There may be occasions where other types of expenses are reimbursed. Where this happens check whether the expenses are excluded from an additional tax charge under section 239 of ITEPA 2003 (before 6 April 2003 – section 157(3) of ICTA 1988). Where there is no additional tax liability, no Class 1 NICs are due. Where there is an additional tax liability, Class 1 NICs will be due on any expense which is not a specific and distinct business expense, see

NIM05020.

Qualifying accessories for use in a provided carQualifying accessories which an employee purchases, for use in an employer provided car, are not treated as motoring expenses for the purposes of section 239 of ITEPA 2003 (before 6 April 2003 – section 157(3) of ICTA 1988). The price of any qualifying accessory is added to the list price of the car when determining the car benefit charge, see EIM23140 (before 6 April 2003 - SE23127).