The general rule is that an employer can apply for a dispensation to remove reporting obligations for any payment that does no more than meet or reimburse the necessary costs of business travel. There is no liability for NICs in respect of such payments. Payments for travel that is not business travel and payments in excess of necessary costs are taxable and attract a liability for Class 1 NICs.

The only exception to this rule is for payments to meet the cost of business travel in an employee's own vehicle. For such travel there is a statutory maximum amount that can be paid tax and NICs free, based on mileage payments.

In addition to meeting the direct costs of travel, payments that can be subject to a dispensation can include amounts to meet other necessary costs incurred during the journey. This might include subsistence and accommodation costs, parking charges, bridge or motorway tolls, congestion charges or other similar costs.

Payments can also be made to meet incidental costs that are not necessary costs of travel.

Look at accounting for tax and NICs for guidance on the treatment of various ways in which you might meet the cost of business travel.

The employee's costs need not be restricted to the cheapest mode of travel or the shortest possible route. For more guidance look at EIM31825 and EIM31835.

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