NIM16060 - Class 1A NICs: Special Class 1A NICs cases: Cars provided for private use: Motoring expenses connected with a car provided for private use

Paragraph 7, Part VIII, Schedule 3 of the SS(C)R 2001

Paragraph 4, Part V, Schedule 3 of the 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 section 157 and Schedule 6 ICTA 1988.

Tax treatment of motoring expenses connected with a provided car

The 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 157 ICTA 1988. An exception to this is the cost of a chauffeur.

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

NICs treatment of motoring expenses connected with a company car

In 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 157 ICTA, 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 voucher

If the motoring expenses are met by way of a non-cash voucher, no Class 1 NICs liability arises, see NIM02415.

Types of motoring expense

The 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.

Although the above are the main expenses which are likely to arise, there may be occasions where other types of expenses are reimbursed. Where this happens it will be necessary to check whether the expenses are excluded from an additional tax charge under section 157(3) ICTA 1988. Where there is no additional tax liability, no Class 1NICs are due but 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.

Qualifying accessories for use in a provided car

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