HOT TOPIC
Laing / Willmott Tax cases Both Laing and Willmott submitted protective claims with HMRC in 2010 on the grounds they realised they had overpaid NICs in error. After many rounds of correspondence, HMRC closed the file saying no refund was due, at which point both taxpayers were able to formally appeal and have a judge hear the case. Laing was heard first at the First Tier Tribunal (FTT). They used a ‘big four’ firm as instructing agents and to cut a long story short, they lost. Willmott Dixon used me as their agent, and they won. Both cases were appealed and heard together in March 2023. The outcome was that the judges agreed with both taxpayers that their car allowances were RMEs (not to be confused with relevant motoring expenses, which is a phrase that doesn’t exist). Because the car allowances were held to be RME then the disregard in Paragraph 7A Part VIII Schedule 3 of SI2001/1004 automatically kicked in, meaning that NICs had to be reduced as in my example above. Both Laing and Willmott were held to have wrongly overpaid NICs in respect of their car allowances and therefore HMRC had to repay that NI. Because of statutory time periods, you can only claim refunds for the current tax year plus previous six tax years. So, at best, you can put in a claim now to recover NIC back to 2017/18. Because Laing / Willmott followed our advice they were able to go back to 2004/5. Many other companies decided to hold back to see how the above appeals developed before putting in a claim. Sitting on the sidelines isn’t always the best strategy and those companies have lost roughly 12 years’ worth of refund. Sometimes you have to be ‘in it to win it’. What can / should companies do now? You have until 5 April to decide if you wish to claim retrospectively before another tax year falls out of account. Questions you need to ask yourself first are: l have you got the historic mileage records? HMRC typically won’t allow extrapolation l are you happy those milage records are robust and that nobody has overclaimed or has claimed in error (e.g., commutes)? l is the value of the claim big enough to be worthwhile? l HMRC will ask several questions so are
you happy there are no skeletons in the closet regarding your: m car policy m car allowance policy
As part of the Traxmiles services, a team of mileage reviewers also review every single journey to make sure it is HMRC compliant. As for dotting the I’s and crossing the legal T’s, you need specialist advice on your policy, and your payroll processes. I would say this isn’t something that a generalist could do. Far better to engage a specialist who has done this dozens, if not hundreds, of times. There are still some unresolved questions. As the Willmott / Laing cases are relatively new, we still don’t know how HMRC will refund staff the NIC that was deducted from their car allowances in error. Will HMRC repay the primary NICs to the employer, who will then need to track down and refund those employees or will HMRC refund the employees directly? Incidentally, I did help one employee who submitted his own claim and HMRC eventually capitulated and wrote him a cheque. I.e., in the same way they paid him for the tax relief on his business mileage they also paid him his NIC relief. Unfortunately, whereas there are HMRC websites where you can claim income tax relief online, there’s no such equivalent site for NIC. As this develops, I will keep all my clients informed. n Key takeaways Here are my top tips: l ensure you have a robust mileage reporting tool l ensure your policies and procedures are HMRC compliant and optimised l consider submitting a retrospective reclaim if you have the mileage data going back the appropriate number of years l make sure you give staff the relief to which they’re entitled at source every month via the payroll. John Messore is an NIC and payroll taxes expert, who sits on the Institute of Chartered Accountants in England and Wales (ICAEW) Employment Taxes and NIC Technical Subcommittee, as well as sitting on the Technical Committee of the Chartered Institute of Taxation (CIOT), and lecturing internationally on various aspects of taxation including value added tax. He can be contacted at john. messore@innovationllp.com or on 07884006164.
m expenses policy m P11D reporting m OpRA (optional remuneration
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.......arrangements)? As for going forward, you must give the driver the NIC relief to which they’re entitled at source via the payroll. Even then, there are issues and mantraps which are further complicated where fuel cards are involved. And still further complicated if you aren’t applying the litany, following the Overdrive case.
Examples of complication Regulation 22A(4) (https://ow.ly/ PYI350PWuFm) states: “M is the sum of—
(a) the number of miles of business travel undertaken, at or before the time when the payment is made— (i) in respect of which the payment is made, and (ii) in respect of which no other payment has been made; and (b) the number of miles of business travel undertaken— (i) since the last payment of relevant motoring expenditure was made, or, if there has been no such payment, since the employment began, and (ii) for which no payment has been, or is to be, made; and R is the rate applicable to the vehicle in question, at the time when the payment is made, in accordance with section 230(2) of ITEPA 2003 and, if more than one rate is applicable to the class of vehicle in question, is the higher or highest of those rates.” Mantraps you must look out for include paying for the same mileage more than once. Secondly, you may have mileage that you chose not to pay (e.g., some companies don’t pay the first ten or 12 miles of any business journey). But you still have to give the driver relief at 45p based on mileage driven between the dates of the last payment of car allowance and this car allowance. So, you need real time data of mileage driven, as it’s driven. This is so specialised that you do need a real time mileage system such as Traxmiles. The Traxmiles app records all journeys as they are driven without even taking the phone out of your pocket.
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| Professional in Payroll, Pensions and Reward |
Issue 95 | November 2023
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