HMRC have released an update on how to reclaim historic NIC charges following their loss in the Upper Tribunal ruling of the joint case of two constructions, Wilmott Dixon and Laing O’Rourke.
Both employers had car schemes that let participants choose between a company car and a cash allowance. Employees who chose the cash allowance had to maintain a private vehicle suitable for business use, but there was no requirement to spend the allowance on motoring expenses.
The employers maintained that the car allowance payments represented ‘relevant motoring expenditure’ which, whilst in principle is subject to NIC, also allows for relief on the ‘qualifying amount’ of 45p per business mile travelled less any business mileage reimbursed.
Who will the update affect?
HMRC’s confirmation of the NIC reclaim rules may affect employees with car allowances that use their own vehicle for work.
In a recent update to employers, HMRC confirmed: “The tribunal ruled that it is not just payments relating to actual use, but also potential and anticipated use of the vehicle. This will affect those who receive fixed sum car allowance payments where those payments are made in anticipation or potential use of a qualifying vehicle.”
A refund of overpaid contributions may be claimed for earlier years in instances where car allowance payments have been made and NICs have been paid on these amounts by employees.
However, HMRC have stressed that, for a claim to be successful amongst other conditions, there needs to be evidence of business mileage actually undertaken.
Further information on the rates can be found in the Employment Income Manual.
HMRC guidance is currently being updated to reflect the change following the tribunal ruling, and further communications will be made once complete.
How to make a claim
Employers in a similar situation to the two businesses which were successful in their case against HMRC will be expected to make their claim by way of adjusting their PAYE RTI submissions.
If this is not possible, it should be the case that written submissions can be made to HMRC.
If you are an employee who believes they are due a refund, we would recommend contacting your employer in the first instance. The employer should make a refund claim, and repay any overpaid NICs due to you.
If the employer has not applied for a refund, employees may be able to approach HMRC directly.
Get in touch
If you would like to find out more about NIC reclaim rules on car allowances, whether you are an employer or an employee, or need help submitting a claim, get in touch with PM+M tax manager, Julie Walsh by clicking the button below…