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Total People (now Cheshire Employer and Skills Development Limited) v HM Revenue & Customs – is to be appealed

06 September 2011

The Upper Tribunal recently over turned a First-tier Tribunal decision that business motoring allowances paid to staff were exempt from National Insurance Contributions (NIC). We understand Cheshire Employer and Skills Development Limited have confirm they are to appeal this decision.

The Upper Tribunal held that it was not enough that the payments represent, or were intended to represent, reimbursement of motoring expenditure; they must be of ‘relevant motoring expenditure’ within the meaning of reg 22A(3), which in turn requires that the payment is a ‘mileage allowance payment’ as defined by s229(2) of ITEPA.

The definition of a mileage allowance payment is ‘amounts ... paid to an employee for expenses related to the employee’s use of ... a vehicle for business travel’. The essence of the definition is clearly the link between the payment and the use of the vehicle.

The tribunal concluded that car allowances paid were correctly subjected to NIC and as such, no refund is due. We expect a further appeal to be made.

What should employers do now?

If you have already submitted a claim, you should consider reviewing it in light of these findings. Your claim may still be feasible or the claim may need to remain open as the decision is being appealed.

If you have not submitted a claim, you may still wish to do so. The potential success will depend on the underlying structure and allowances paid.

For those employers who want to benefit going forward, they should consider implementation of a structured approach to any car allowance and mileage payments. Such a solution can take into account tax and NIC and minimise administration, delivering income tax relief for those not already submitting claims or a timing advance to those that do and NIC savings for both employee and employer.

Download a copy of the appeal Cheshire Employer and Skills Development V HMRC

If you have any queries regarding the above please do not hesitate to contact Susan Ball on: +44 (0)20 7842 7100 or via susan.ball@crowecw.co.uk 


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