An Upper Tier Tribunal case concerning the repayment of National Insurance contributions totaling £3.6 million has been decided in favour of the taxpayers.
The case concerned two construction companies, Laing O’Rourke Services Limited (Laing) and Wilmott Dixon Holdings Limited (Wilmott), who had a joint hearing at the Upper Tier Tribunal due to the similarities in their circumstances.
Both companies had provided employees with certain car allowance payments as part of their vehicle policies. The taxpayers’ claimed the payment was for an employees’ business use of their private vehicle and as such the payments were ‘relevant motoring expenditure’ and should not have attracted National Insurance contributions.
HMRC argued that the payment was in lieu of the employee not taking a company car and therefore qualified as earnings subjected to National Insurance contributions. The judges at the Upper Tier Tribunal held in favour of the taxpayers and overruled HMRC’s arguments. They stated that in deciding if the payments were relevant motor expenses, it was irrelevant that the employees could use their ‘allowance’ however they saw fit, nor did it matter whether the amount paid was in relation to their expected or anticipated business miles, as opposed to the actual business use.
Many companies have made protective claims for the repayment of National Insurance. Any company operating a car allowance payment scheme should now review their position to determine whether they are in a similar position to Laing or Wilmott, as they may be able to reclaim overpaid contributions.
HMRC may be granted permission to appeal to the Court of Appeal or failing that, they may look to issue new legislation to bring car allowance payments within the scope of National Insurance contributions. Only time will tell, but as things stand, this is a hugely significant judgement.
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