COMPLIANCE
Mileage allowances and living accommodation expenses
Main points l the recent decisions in Laing O’Rourke and Kunjur both relate to disputes involving employment-related expenses l the Upper Tribunal (UT) found for the employers and decided that National Insurance contribution (NIC) refunds were due on relevant motoring expenditure (RME) l the UT found for HM Revenue and Customs (HMRC) by denying tax relief on living accommodation expenses. T wo tax cases were recently decided at the UT which concern themselves with expenses payments. The first, Laing O’Rouke, centres on the NICs legislation and its interaction with the payment of mileage allowances. The second, Kunjur, concerns itself with the tax relief for living accommodation expenses claimed by a trainee surgeon while living away from his home during the week to complete his studies and on-the-job training. Laing O’Rourke This case, Laing O’Rourke Services Limited v HMRC, and HMRC v Willmott Dixon Holdings Limited 1 – two cases with very similar circumstances heard simultaneously – serves as a reminder that National Insurance (NI) legislation isn’t always aligned with income tax legislation. The NI treatment of mileage allowances is such an example and differs to the income tax treatment. The Social Security (Contributions) Regulations 2001 Section 22A 2 deals with RME. We see upon reading this section that RME is only treated as earnings for NICs purposes if it exceeds the amount the employer can pay NI-free, known as the ‘qualifying amount’ (QA). RME and QA RME is defined 3 in the National Insurance Manual (NIM) 05820 as: l a mileage allowance payment, or l an amount that would be such a payment but that is paid to another for the benefit of the employee, or l any other form of payment, except a payment in kind, made by or on behalf of the employer and made to, or for the benefit of, the employee in respect of the use by the employee of a qualifying vehicle. According to NIM 05830 4 , the QA is arrived at by multiplying the relevant approved mileage rate by the total business miles being paid.
Justine Riccomini MSc FFTA AIPA Chartered MCIPD ChFCIPP, head of taxation, the Institute of Chartered Accountants of Scotland (ICAS), provides an overview of the outcomes of two employment tax cases which carry important considerations for advisers in terms of qualifying employment-related expenses
| Professional in Payroll, Pensions and Reward | March 2024 | Issue 98 28 March 2024 | Issue 98
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