NIC Opportunity

Background

You may have seen in the press recently that HMRC lost a significant tax Tribunal case (Total People Ltd) relating to National Insurance Contributions (NICs) on employee business mileage allowances. This provides some employers with an opportunity to re-claim substantial employer NICs for prior years.

Many businesses pay their employees less than the full 40p per mile rate for business travel in their private vehicles. To compensate, they often pay an annual lump sum car-user allowance, treated as taxable/NICable pay. Employees then claim tax relief from HMRC on the difference between the statutory 40p rate and the lower employer rate.

The Opportunity

The Total People case established that employers can claim a refund of employer NICs (going back 6 years) on the differential in mileage rates where NICs have been paid on the corresponding lump sum allowance.

As a general guide, this could mean a back-dated employer NIC refund of over £100,000 per 100 employees, depending on their mileage. Employees can also claim a refund of their own NICs.

Action

In order to establish whether a refund may be due, it will be necessary to consider the precise nature of any lump sum payments (they must be specific car allowances rather than salary) and any claims must be supported by detailed business mileage records.

We can help you consider these issues and calculate a claim to maximise your potential refund. We would do this on a contingent fee or time-spent basis, or a combination of both, depending on your requirements. Whilst we are expecting HMRC to appeal against this decision, we still believe that the opportunity should be pursued.

If you would like to discuss this or any other tax matter, please do not hesitate to contact us.

Elysian Associates
October 2010
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