Are You Due A National Insurance Refund On Car Allowances?

In recent times, the topic of car allowances has garnered significant attention, especially in the realm of employment tax. A pivotal Upper Tribunal decision has shed light on the potential for employers to claim refunds ...

This would be on National Insurance Contributions (NIC) related to car allowances provided to their workforce. This development is not just a fleeting headline; it has profound implications for businesses and their employees.

The crux of the matter revolves around a case involving HMRC and two prominent companies, Laing O'Rourke and Willmott Dixon. The outcome of this case, in which HMRC faced a setback, has set a precedent that could benefit numerous employers.

Specifically, those who have been paying car allowances under similar circumstances might now be eligible to claim Class 1 NIC refunds for previous years!

This isn't the first time such an issue has come to the fore. A decade ago, the Total People case saw the Court of Appeal siding with the taxpayer on a closely related matter. The recent case involving Laing O'Rourke and Willmott Dixon is essentially a continuation of that narrative, further solidifying the stance on car allowances and NIC.

So, what's the real issue at hand? It pertains to the disparity between the HMRC's approved mileage rate, which stands at 45p, and the business mileage rates that employers often pay. The question arises whether these car allowances can be classified as Relevant Motoring Expenditure (RME).

Furthermore, there's a debate on whether the difference between the approved mileage rate and the rate paid by employers can be exempted from NIC under the label of a 'Qualifying Amount'. For employers pondering over the possibility of an NIC refund, several factors come into play.

The circumstances surrounding the car allowances, the application of Class 1 NIC on these allowances, and the business mileage undertaken by employees receiving these allowances are all critical considerations. Additionally, the rate at which business mileage is reimbursed and the maintenance of appropriate mileage records are also pivotal.

It's essential to note that there are time constraints to be mindful of. Claims can be made for refunds spanning six tax years. This means that until the 5th of April 2024, eligible employers can file claims for NIC on car allowances dating back to the 2017/18 tax year. In certain scenarios, some employers might even have the leeway to trace back further.

"This is a golden opportunity for employers to re-evaluate their approach to car allowances!"

Especially when it comes to National Insurance as this is an opportune moment for employers to enlighten their employees about potential tax relief on business mileage payments, given the prevailing circumstances.

The landscape of car allowances is evolving, and staying informed is the key. Employers should seize this moment to review their stance, explore potential NIC refunds, and ensure that they are in compliance with the latest legal directives.


If you'd like to find out more about anything I've written here, do call me on 01908 774323 or leave a comment below and let's see how I can help you.