John Messore and Peter Moroz of Innovation Professional Services Ltd explore Willmott Dixon’s legal win against HMRC over cash allowances and what it means for other businesses with grey fleets.
John Messore, joint managing director of Innovation Professional Services Ltd
Late last year, Willmott Dixon won its appeal against HMRC in the First-Tier Tribunal to reclaim overpayment of Class 1 National Insurance Contributions on cash allowances paid to drivers, potentially vindicating current and future wider fleet claims for NIC relief worth millions.
The case relates to relevant motoring expenditure and National Insurance, and could open the doors to other claims, according to Innovation’s John Messore and Peter Moroz.
“We were extremely delighted to have had the opportunity and pleasure of assisting Willmott Dixon (WD) in their NIC case with HMRC. Our interest in this subject matter was first sparked when we read the original Total People case in 2010. We were one of the few third parties to sit through the Court of Appeal hearing in Total People (who by then were called Cheshire Employer & Skills Development Limited) and the three CoA judges were clear that if an employee has to spend his own money on providing and using his own car for business purposes then he should receive the same relief for NIC as he does for income tax purposes.
“We encouraged a number of companies to put in protective claims and many of those claims are still active and waiting to see what happens with Willmott Dixon and indeed the Laing O’Rourke case which went before it.
“Laing were possibly unlucky to lose earlier last year. HMRC’s main thrust was that Laing could not find who wrote the original policy and so could not prove what the purpose of the car allowance was – albeit it may seem pretty obvious to many what the purpose of a car allowance is.
“In the Willmott Dixon case, the Judge said that for there to be NIC relief, the car allowance had to be a payment of Relevant Motoring Expenditure (RME). This is a technical term defined in the NIC Regulations but includes any payment to the employee ‘ in respect of the use’ of their car. The judge in Willmott Dixon departed from his predecessor by saying that a car allowance did not necessarily need to be fully used on business mileage to fall within the definition of RME. He also said that mere availability for use or expected future use also brought the car allowance payment into the definition of RME.”
What next?
Peter Moroz, also joint MD of Innovation Professional Services Ltd
“Laing have already started the process to appeal their decision against HMRC.
“Whilst not necessarily binding on other cases, the WD judgement does shine a glimmer of light on all the other protective claims that have been submitted.
“The key thing about a claim to be successful is that the documentation relating to the car allowance has to be correctly worded when it comes to the reasons for its payment and what the obligations of the driver are in return for the payment. You also need to have the business mileage records to support your claim.
“If companies don’t already have a robust tax compliant on-line mileage system then we would certainly encourage them to consider getting such a system. Having reviewed virtually every system out there we would certainly recommend Traxmiles as an option.”
John Messore and Peter Moroz are managing directors at Innovation Professional Services Ltd and sit on technical committees of the ICAEW and CIOT with a particular focus on employment taxes and National Insurance. They can be contacted on 07884 006164 or by email: [email protected] and [email protected]
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