If employers pay less than the Approved Mileage Allowance Payments and pay a car allowance​, their employees ​(and the employer) are entitled to national insurance relief on the allowance following a 12-year-long campaign. 

Where an employer pays less than the Approved Mileage Allowance Payments (AMAP), the employee is entitled to Mileage Allowance Relief (MAR).

Action for employers

Employers should act now to consider submitting protective claims before earlier tax years become time barred. Specific questions employers should consider when assessing their position include:

  • Do your car allowance payments represent ‘relevant motoring expenditure’?
  • What’s the NIC at stake?–
  • Did employees sacrifice or otherwise choose to forgo earnings in return for a car allowance payment? 
  • What information do you need to support a claim?
  • How will you process any claims?
  • How should you communicate with employees?

CN Chartered Accountants  has extensive experience assisting employers to reclaim NIC on relevant car allowance payments. If you would like to discuss this, or any aspect of your company car arrangements, please get in touch with your CN contact.

 

Reclaim NIC on car allowance paid to your employees?

Following two recent decisions in the Upper Tax Tribunal it may now be possible for both employers and employees to recover NIC where employers pay a car allowance to their employees and have paid less than Approved Mileage Allowance Payments (AMAPs).

For example, suppose that an employer pays a mileage allowance to the employee for business travel in their own car of, say, 40p per mile where the AMAP is 45p per mile and the employee has travelled 5,000 miles on company business in the year.

The employer would reimburse the employee 5,000 miles @40p per mile = £2,000

The AMAP reimbursement is 5,000 miles @45p per mile = £2,250

So the employee would claim tax relief for the difference of £250 on their tax return.

However, up to now there’s been no NIC relief for this but in the two recent tax cases it was held that NIC relief should be due and is available for both the employer and employee.

It’s quite possible that HMRC will appeal the decision but in the meantime if the above situation applies to you, you might want to lodge a protective claim for NIC relief for both employer and employee going back as far as the 2017/18 tax year.

 

CN Chartered Accountants  can help you lodge the appropriate claim. If you would like to discuss this, or any aspect of your company car arrangements, please get in touch with your CN contact.