NIM05635 | Class 1 NICs: Expenses and allowances: Congestion and Clean Air Charges

If an employee drives or keeps a vehicle on a public road in the specified zone, a congestion charge is due.

Some local authorities have introduced clean air zones. If a motor vehicle exceeds certain emission standards, a charge will be due if that vehicle is driven within the charging zone.

The treatment for NIC depends upon who owns the vehicle:

• If the charge is incurred by a vehicle registered solely in the employer’s name and the employer pays the charge (or reimburses the employee for the payment) there is no tax consequence (and therefore no benefit consequence for NIC) upon the employee

• If the charge is incurred by a private vehicle registered in the employee’s name and the employer either pays the charge to the relevant authority or reimburses the employee the amount paid, then such monies are earnings of the employee liable to Class 1 NIC

• If payment is made by the employer to the local authority in advance of the charge being incurred, the employer is providing a benefit. The contract is between the local authority and the employer. The employer is providing the employee with a benefit with Class 1A NICs becoming due.

Where a late payment surcharge is applied, the treatment of any monies paid by the employer is treated in the same way as the basic charge - in the first two scenarios.

Penalty for non-payment of the congestion or clean air charge charge

If the charges (and any surcharge) are not paid, the local authorities may issue a penalty notice. The treatment of these payments where made by the employer also depends upon who owns the vehicle:

• If the penalty for non-payment is incurred upon a vehicle registered solely in the employer’s name and the employer pays the penalty (or reimburses the employee who might have paid the penalty on behalf of the employer) there is no tax consequence (and therefore no benefit consequence for NIC) upon the employee

• If the penalty for non-payment is incurred upon a private vehicle registered in the employee’s name and the employer either pays the penalty to the relevant authority or reimburses the employee the amount paid, the employer is simply meeting a liability of the employee. The amount paid or reimbursed is earnings liable to Class 1 NIC.

Work at a temporary location

Where a congestion charge is incurred in the course of a business journey that is not ordinary commuting or would not otherwise be incurred in home to work travel, such an expense may fall to be reimbursed in accordance with normal travel and subsistence rules (see NIM05620).