Generally, any payment which an employer makes in connection
with transport for an employee’s journey between home and
work is liable for both tax and NICs because it is ordinary
commuting or ‘home to work’ travel.
However, until 6th April 2003, Extra Statutory Concession
(ESC) A66 allowed such payments to be excluded from tax if they
were paid in connection with occasional late night journeys home
and certain conditions were satisfied. NICs legislation was changed
with effect from 6 April 1993 to align with ESC A66 in respect of
late night journeys home and from that date such payments were
excluded from Class 1 NICs.
The NICs legislation provided that if an employer
occasionally required an employee to work until 9pm or later and
provided private transport home, then any payments made in
connection with the provision of the transport could be excluded
from NICs as long as the occasions were not frequent nor regular.
Late night working was not regarded as regular or frequent as long
as it did not occur on more than 60 occasions in any tax year or
did not follow a predictable pattern (for example, every Friday
night).
Where an employer contracted with a taxi firm, or similar
hire company, to provide transport for their employees any payment
made to the taxi firm could be excluded from Class 1 NICs as a
payment in kind by virtue of the then regulation 19(1)(d) of the
Social Security (Contributions) Regulations 1979. This was
applicable whether or not the journey satisfied the requirements of
ESC A66.
From 6 April 2001, NICs legislation was changed in relation to
late night travel home. This change was made to ensure that
non-cash vouchers made available in respect of occasional late
night journeys home were also excluded from Class 1 NICs if they
satisfied the requirements of ESC A66.
The NICs legislation was contained in regulation 25 and in
paragraph 6(g) of Part V and in paragraph 8(d) of Part X of
Schedule 3 to the Social Security (Contributions) Regulations 2001.
This legislation fully aligned the Class 1 NICs position in respect
of late night travel home with the conditions for tax exemption in
ESC A66.
See SE10210 for general guidance on the application of ESC
A66 and see
NIM06365 for guidance on the NICs
exclusion where car sharing arrangements break down.
With effect from 6 April 2004 the Social Security
(Contributions) Regulations 2001 were amended in recognition of the
coming into force of Section 248 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 A66 (late night taxis and car sharing) can now be
found at section 266(1) ITEPA 2003 (exemption of non cash vouchers
for exempt benefits) and section 248 ITEPA 2003 (transport home:
late night working and failure of car sharing arrangements).
As a consequence the NICs legislation was amended to reflect
the new ITEPA 2003 provisions. The NICs exceptions are now
contained at paragraph 5 of Part V and paragraph 8 of Part X of
Schedule 3 and, with effect from 6 April 2004, disregard from
earnings:
These changes ensure that full tax and NICs alignment on the
treatment of late night travel home is retained.
A review was undertaken during 2007 because of some
inconsistencies in the way s.248 of ITEPA was being interpreted by
employers, particularly the 60 journeys a year provision. Some
employers considered that this enabled an employee to be provided
with a taxi at least once each week, but they had failed to take
account of the other elements of the condition:
to show that the working conditions as stipulated above are fully met and that the employee satisfies all conditions as outlined. Any employee routinely on call until 9pm or later will not satisfy the conditions. NICs, like tax, will therefore be applicable on payments made for taxis.
Where the late night transport home is provided in such a way that it is a payment in kind (for example, where the employer contracts directly with the taxi firm) this continues to be excluded from Class 1 NICs by virtue of paragraph 1 of Part II of Schedule 3 to the Social Security (Contributions) Regulations 2001 [formerly regulation 19(1)(d) of the Social Security (Contributions) Regulations 1979]. It will also be excluded from Class 1A NICs in accordance with the general exception from Class 1A NICs in relation to anything which is not taxable as general earnings. . (See NIM13000 for guidance regarding the general principles concerning Class 1A liability).
