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According to John Messore of Innovation Professional Services, who was in court to hear all the arguments first hand:

The Court of Appeal delivered its judgment on the long running Total People case on 6 November 2012 with all judges in favour of the appeal by the taxpayer.

Total People should now receive back c. £147,000 in NIC from HMRC in respect of around 160 staff – or nearly £1,000 a head.

You may recall that Total People operated an expense scheme whereby staff with their own cars who drove fewer than 2,500 business miles p.a. could claim 40 pence per business mile and those staff driving over 2,500 business miles p.a. instead received 12 or 13 pence per business mile plus an annual lump sum allowance, paid on a monthly basis.

In common with other companies Total People had taxed their car allowances through the payroll and therefore paid both employee and employer NIC on that allowance.

To the extent that staff who were paid 12/13 ppm did any business mileage they could put in a personal tax reclaim from HMRC for the difference between the mileage reimbursement received from their employer and the Approved Mileage Allowance Payments of 45/25 ppm (previously 40/25 ppm).

So the employee could get the tax relief, but not the NIC relief and the employer received no relief at all for NIC. The employer was left suffering employer NIC on the full car allowance of 13.8% (or 12.8% in earlier years).

Under this landmark case however Total People and many other companies with roughly similar circumstances can recover that Employer NIC.  Unfortunately the mechanics for getting back the employee NIC can be difficult.  However, if companies make a protective claim it will at least stop the clock running as NIC refunds can be back dated only 6 years. It is unlikely that HMRC will appeal this case and so the door is now open for companies to submit NIC reclaims.

E.g. Average company driver does 6,000 business miles in their own car p.a., receives business mileage payments of 15 ppm when the AMAPS rate was 40 ppm (now 45 ppm). Employer has 200 similar staff.

Following Total People the employer can claim back NIC of:

6 years x 200 staff x 6,000 business miles x say 12.8% x (40-15) ppm = £230,400!

The only note of caution is that HMRC may make it difficult for companies to claim and the slightest weakness in any argument or claim put forward could lead to that claim being denied and so specialist professional advice should be always be sought before contacting HMRC. 

John Messore ACA ATII and Peter Moroz FCA ATII are directors of Innovation Professional Services Limited and specialise in all matters relating to the taxation of car allowances, company cars, fuel, fuel buy-out and other employee benefits and also offer an on-line mileage audit and capture solution. They can be contacted on 01633 415326 or at [email protected] or [email protected]

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Steve Moody

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