Motoring towards an NIC refund

A recent court case “Laing O’Rourke Services Ltd and The Commissioners for HMRC and Willmott Dixon Holdings Ltd [2023]” may mean that employers can claim a refund of National Insurance Contributions (NIC) from HMRC on car allowances paid to employees. The case concerned the definition of relevant motoring expenditure (RME) which, according to the NIC regulations, is not subject to NIC. The court confirmed that, in the cases considered, car allowances met the definition of RME. The employers are entitled to NIC reclaims. It is reported HMRC has confirmed that it will not appeal the ruling so claims are now possible and can be backdated for six tax years in addition to the current year.

HMRC have made it clear that every claim should be based upon its own facts and on its own merit. Previous cases have not been considered to set a precedent. However, there is now an opportunity to collaborate with employers with a similar fact pattern as the recent cases to establish if there is an opportunity to make a protective claim.

How has this happened?

Employers often pay cash allowances to employees instead of providing a company car or van. The HMRC Approved Mileage Allowance Payments (AMAP) rates for tax/NIC free reimbursement of business mileage in cars or vans   are up to 45p per mile for the first 10,000 business miles per year, 25p per mile thereafter. These AMAP rates are intended to cover the general and mileage related costs of running the vehicle such as fuel, servicing, wear and tear, insurance, road fund licence and loan interest. However, employers who provide cash allowances often reimburse lower rates for business mileage on the basis that the cash allowance covers the costs other than fuel. Employees can claim tax relief on the difference between the AMAP rates and the mileage rates reimbursed by their employer however employers could not previously claim relief on the NIC paid in the same way.

The court stated that the definition of RME should apply to “a payment by an employer which is broadly in respect of the use by an employee of a vehicle” and extends “to payments in respect of future use, whether or not the employee bears the cost of that use”.

How can Crowe help?

Crowe can undertake an initial review of your policies and procedures to identify if a claim is possible. We would estimate the potential size of any claim and check whether you hold the required records to support a claim. We can also make the protective claim for the last six years.

A claim may be worthwhile if significant business mileage has been reimbursed at rates lower than the AMAPS rates to employees who are paid car or van allowances instead of being provided with a company car or van.

HMRC know that putting together a claim would place an administrative burden on employers – many employers backed out of claims because of this. We can collaborate with you and HMRC to establish a reasonable request that is necessary to substantiate the claim.

We can provide you with valuable insight to HMRC’s approach and can share our knowledge to help advise you on whether a claim would likely succeed or not. For further information, please contact Glen Huxter, Kate Pollinger, or your usual Crowe contact. .