HMRC faces having to refund employers after wrongly refusing tax relief from national insurance payments paid on car allowances, a UK court has ruled.
Two employers – Wilmott Dixon and Laing O’Rouke – have successfully argued that car allowance payments made to its employees were ‘relevant motoring expenditure’ and therefore should qualify for relief from Class 1 National Insurance Contributions (NICs). Both cases were heard together. Laing O’Rourke was appealing an earlier decision which had ruled in favour of HMRC, while HMRC was appealing a previous ruling in favour of Wilmott Dixon being able to claim the relief.
Of note, the judges’ ruling said that the definition of ‘relevant motoring expenditure’ is concerned with the nature of the payment by the employer to the employee, in particular, whether it is in respect of the use of a car. Relevant motoring expenditure, they agreed, should be given a wide meaning which includes expected use, potential use and availability for use.
See the judges’ ruling: UK Upper Tribunal ruled in favour of the employers.
