NIM06115 | Class 1 NICs: Expenses and allowances: Relocation allowances: Introduction

Section 3(1) of the Social Security Contributions and Benefits Act 1992

Regulations 19(1)(zc)and 19(9) Social Security (Contributions) Regulations 1979

Regulation 25 and paragraph 2 of Part VIII of Schedule 3 to the Social Security (Contributions) Regulations 2001

Income Tax (Earnings and Pensions) Act 2003

Income and Corporation Taxes Act 1988

General

From 1975 payments of relocation allowances were generally not subjected to NICs because the view which subsisted was that such payments were not earnings for the purposes of section 3(1) of the Social Security Contributions and Benefits Act 1992 (see NIM02010 for general guidance on the meaning of “earnings”).

Legal advice received in 1997 cast doubt on this stance, and it was therefore determined that the opportunity should be taken to align the NICs position with the treatment of relocation allowances for tax. Legislation was introduced into what were then the Social Security (Contributions) Regulations 1979 (at regulation 19(1)(zc) and 19(9)) to limit the exclusion from NIC liability generally only to those relocation allowances which were capable of being excluded from tax.

The new provisions took effect from and including 6 April 1998. They serve to exclude from NICs any relocation allowance which is excluded from tax.

In April 2001 the 1979 Contributions Regulations were consolidated. Regulation 19(1)(zc)and 19(9) became regulation 25 and paragraph 2 of Part VIII of Schedule 3 to the Social Security (Contributions) Regulations 2001.

In April 2004 paragraph 2 of Part VIII of Schedule 3 was amended to reflect the coming into force of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) from 6 April 2003. Although the NIC provisions now reflect the language and numbering of ITEPA 2003 it is important to remember that there has been no change in the treatment of relocation allowances as a result of the April 2004 amendments.