NIM06400 | Class 1 NICs: Expenses and allowances: Travelling expenses: Employees working overseas

Position from 6 April 2004

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).

NICs legislation was amended with effect from 6 April 2004 to reflect the new ITEPA 2003 provisions. The NICs exception within paragraphs 4 to 4D of Part VIII of Schedule 3 disregard from earnings:

• a payment of, or a contribution towards, expenses that are deductible for income tax purposes under section 341 ITEPA 2003 (Travel at start or finish of overseas employment);

• a payment of, or a contribution towards, expenses that are deductible for income tax purposes under section 342 ITEPA 2003 (Travel between employments where duties performed abroad):

• any amount which, by virtue of section 370 ITEPA 2003 (Travel costs and expenses where duties performed abroad: earner’s travel) is deductible from taxable earnings

• any amount which, by virtue of section 371 ITEPA 2003 (Travel costs and expenses where duties performed abroad: visiting spouse’s or child’s travel) is deductible from taxable earnings

• any amount which, by virtue of section 376 of ITEPA 2003 (Foreign accommodation and subsistence costs and expenses (overseas employments) is deductible from taxable earnings, and

• any expenses or amount that would be so allowed or deductible under any of the above tax provisions if the employee’s earnings were subject to income tax.

Changes to Part VIII of Schedule 3 ensured that the NICs treatment of travel costs and expenses incurred by employees working abroad aligned with the corresponding tax treatment and continues to exempt from NICs liability those types of payments which were disregarded prior to 5 April 2004. The NICs provision also means that where the employee is not taxable but remains liable to NICs, the expenses will still be capable of being disregarded.

See EIM34000 onwards for further guidance on the ITEPA 2003 sections quoted above.

Position from 6 April 2016

As of 6 April 2016, the NICs disregards in paragraphs 4 to 4D of Part VIII of Schedule 3 to the Social Security (Contributions) Regulations 2001 do not be apply. This if the expenses are paid or reimbursed using a salary sacrifice arrangement, an unapproved scale rate, or as part of a round sum allowance (see NIM05015).