A judgement was passed on 10th July 2023 by the Upper Tribunal in favour of two major construction companies stating that they were not entitled to repayment of National Insurance Contributions (NICs).
Although the two companies were different, both raised similar issues regarding liability for the Class 1 NIC on the payment of certain car allowances to employees. The case was heard on the 22nd-24th March 2023, with the judgement being passed on the 10th of July 2023.
Laing O’Rourke Services Limited and Willmott Dixon Holdings Limited, the two companies that made the joint appeal, claimed that the payments given to certain members of their staff fell under Schedule 3 of the Social Security Regulations (SSR) 2001 and must not be subjected to NICs. A counter argument by HMRC was that the said relief was not applicable as the payments could not be define as a Relevant Motoring Expenditure (RME).
While the two companies’ appeal was made in basis of Schedule 3, HMRC’s appeal was based in its interpretation of Regulation 22 A and paragraph 7A.
According to Schedule 3, a payment is classified as RME when the mileage allowance payment falls within the meaning of the approved mileage allowance payments (AMAPs) scheme for tax purposes. Regulation 22 A of the 2001 Regulations states that a certain amount which would not otherwise be earnings to be treated as earnings in connection with the use of qualifying vehicles, which includes cars.
According to Mr Justin Michael Green, who was present alongside Judge Jonathan Cannan for the hearing, stated that the FTT, First Tier Tribunal, overlooked the fact that Laing’s claim was made only in respect of payments made to employees who undertook business mileage, and that the payment made to other employees who did no business mileage should affect the nature of the payments made to those that did. He also stated that the FTT was wrong in saying that the payment for expected or anticipated use is not RME.
Because of this reason, the appeal of Laing was allowed and that of HMRC’s was dismissed. Similarly, for Willmott’s appeal, it was stated that the car allowances were not “specific and distinct” payments of expenses incurred by employees and were rather the round sum allowances paid to certain grades of employees irrespective of whether the expenditure was incurred or not.
With this, the joint appeal was dismissed.
