With effect from 6 April 1996 certain expenses paid to workers
on offshore oil and gas rigs or platforms who are transferred to
and from the mainland were excluded from liability for Class 1
NICs. This provided alignment with the tax treatment then afforded
by Extra Statutory Concession (ESC) A65.
The relevant NICs legislation at that time was regulation
19(1)(v) of the Social Security (Contributions) Regulations 1979
but this has now been consolidated as paragraph 6 of Part VIII of
Schedule 3 to the Social Security (Contributions) Regulations
2001.
Workers on offshore oil and gas rigs have to travel between the
mainland and the rig. The employer (or sometimes a third party)
usually pays for this or provides the transport. This does not
attract a liability for Class 1 NICs.
On occasions the timing of the transport to the rig may mean
that the employee has to stay overnight on the mainland close to
the departure point. If the employer pays for or reimburses the
cost of accommodation and subsistence these can also be excluded
from liability for Class 1 NICs.
Where the employer actually provides the transport or
accommodation this is excluded from Class 1 NICs liability as a
payment in kind.
Although Class 1A NICs were extended to most benefits in kind
from 6 April 2000 travel and subsistence costs associated with
travel between oil and gas rigs and the mainland were specifically
excluded if they satisfied the requirements of ESC A65 for
exemption from tax. Regulation 40(7)(j) of the Social Security
(Contributions) Regulations 2001 applied. (See
NIM13000 for guidance on the general
principles for Class 1A NICs.)
The exclusion available in respect of travel between the
mainland and oil and gas rigs was extended with effect from 6 April
2001 also to non-cash vouchers which satisfy the conditions for tax
exemption in ESC A65. This means that from that date, there will be
no liability for NICs on any costs which satisfy the requirements
of ESC A65 no matter how the travel or accommodation is arranged.
See SE67190 for guidance on the application of ESC A65.
With effect from 6 April 2004 the Social Security
(Contributions) Regulations 2001 were amended in recognition of the
coming into force 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 A65 (Workers on offshore oil and gas rigs or
platforms: free transfers from or to mainland) can now be found at
section 305 ITEPA 2003 (Offshore oil and gas workers: mainland
transfers).
As a consequence the NICs legislation was amended with effect
from 6 April 2004 so as to reflect the new ITEPA 2003 provision.
The NICs exceptions are now contained at paragraph 6(b) of Part V
and paragraph 6 of Part VIII of Schedule 3. The NIC provisions
disregard from earnings:
The changes ensure full tax and NICs alignment on the treatment
of travel and subsistence payments (including vouchers) for
mainland transfers in respect of offshore oil and gas workers.
See EIM34110 for general guidance on section 305 ITEPA
2003.
Although Class 1A NICs were extended to cover most benefits in kind from 6 April 2000, there is no liability for Class 1A NICs on any payment in kind which satisfies the conditions for tax exemption in section 305 ITEPA 2003. This is in keeping with the general exclusion from Class 1A NICs of any benefit which is not charged to tax as general earnings. (See NIM13000 for guidance on the general principles regarding liability for Class 1A NICs.)
