Potential NIC refunds for mileage allowances

Following a recent tribunal, employees may not be required to pay National Insurance (NIC) when their employer pays a motoring allowance as a lump sum.

In a case between Total People Ltd and HM Revenue and Customs (HMRC), the judges agreed that payments towards mileage were reimbursements rather than earnings. This means that when an employee has been paid a car allowance on which NIC has been paid, a proportion can be regarded as ‘on account of motoring expenses’ rather than earnings and not liable for NIC.

This creates an opportunity for a potential refund of both employer’s and employee’s contributions, when NIC has been paid on the full allowance.

As this is a first tier ruling, HMRC are considering their response.

Claims may be made if:

• Records have been kept of mileage
• The car allowance is intended for employees’ private cars being used for business purposes 
• There is no link between car allowance and salary 
• Reimbursement was under 40 pence per mile