Prior to April 1993, dispensations issued by the Inland Revenue
applied only for tax purposes. So employers could not take them
into account when calculating an employee’s gross pay for
NICs purposes.
But as a result of an early 1990’s Department of Social
Security/Inland Revenue review into the definitions of earnings for
PAYE tax and NICs purposes, Ministers agreed that employers could
take account of dispensations in deciding whether a NICs liability
arises on reimbursed home telephone expenses. This change took
effect from April 1993.
In 1994, the use of dispensations by employers for NICs
purposes was extended to other expenses payments. On 30 November
1994, the Secretary of State for Social Security confirmed that
employers are allowed to take account of any dispensation in
deciding whether NICs are due on expenses payments they make to
employees.
