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In the recent Upper Tier Tribunal joint cases of Laing O’Rourke Services Ltd and Willmott Dixon Holdings Ltd v HMRC, it was adjudged that car allowances paid to employees were ‘relevant motoring expenditure’, which means that employers may be able to reclaim NIC on the business element of the car allowance.


Car allowance payments are subject to tax and NIC via the payroll.  Employees have been able to claim tax relief on the difference between the amount paid by the employer for business mileage and HMRC’s qualifying amount (i.e., 45p for the first 10,000 business mileage and 25p thereafter), via self-assessment or by completing form P87, but not NIC relief.

First-tier Tribunal (FTT) and Upper-tier Tribunal (UTT) decisions

Both employers offered car schemes to employees where they could choose between a company car or a cash allowance.  Broadly, those that chose the cash allowance (which was based on the seniority of the employees) were not required to spend the allowance on motoring expenses, but they had to maintain a private car suitable for business use.

Both employers contended that the car allowances were ‘relevant motoring expenditure’ and so should attract NIC relief (employee’s and employer’s) on the ‘qualifying amount’ (i.e., 45p/mile for business travel, for NIC purposes) less the amount already reimbursed by the employer for business mileage. HMRC disagreed.

The cases were decided separately before the FTT, with the decision in Laing O’Rourke going in HMRC’s favour and against HMRC in Willmott Dixon. Both employers appealed jointly to the UTT as both concerned similar issues.

The UTT held that ‘relevant motoring expenditure’ should take a broader meaning and include payments for the expected use, potential use and availability for use of a qualifying vehicle, not just its actual use.

In summary, the Tribunal held that the ‘qualifying amounts’ of car allowance payments made to employees who travelled business miles were eligible for NIC relief.

Can you take advantage of the opportunity?

The answer is it depends…

If you meet the following criteria, we would be pleased to discuss the opportunity further with you to explore whether you should submit a retrospective claim to HMRC, going back six years (or earlier, in some cases).

  • You have paid car allowance payments to employees (although not those that were paid as part of a ‘salary sacrifice’ arrangement from 6 April 2018) and it meets the profile of the above Tribunal cases.
  • You can demonstrate that the car allowance payments represented ‘relevant motoring expenditure’.
  • You paid employees less than the ‘qualifying amounts’ (i.e., 45p/mile) for their business travel.
  • You have maintained accurate business mileage and payroll records, to be able to support your claim for each year in question.

It should be noted that the reclaim process can be complex and it is possible HMRC may appeal against the UTT decision.  However, to take advantage of this possible opportunity and to make it worth your while (to benefit you and your employees), we suggest that you consider this if you have had at least 50 employees who received a car allowance, and you think you meet all the criteria outlined above.

If you would like to know more, please contact our Head of Employment Tax, Minesh Trivedi either via email ( or by telephone (07961 616944).

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