Recent HMRC developments and changes to Class 1 NICs for motoring expenditure

The Upper Tribunal case of Wilmott Dixon and Laing O’Rourke put the spotlight on HMRC’s interpretation of the definition of ‘relevant motoring expenditure’ (“RME”) and the disregard for Class 1 NICs. Historically, HMRC has taken a relatively narrow view on the type of motor expense payments that qualified as RME, with the Upper Tribunal taking a different view by determining that RME not only includes payments relating to actual use but should also include the potential and anticipated use of a qualifying vehicle, which may, in certain circumstances, include a fixed car allowance being paid to employees.  

Where employees use their own car (or other qualifying vehicle) for work, and a car allowance has been added to the employee’s gross pay and is subject to both income tax and Class 1 NIC through the payroll, and the employer does not reimburse business mileage or reimburses at less than the HMRC-approved rates, there may be some remaining ‘qualifying amount’ that can be offset against the car allowance, resulting in some of the car allowance payments (or other qualifying RME) being disregarded for Class 1 NIC purposes (unless arrangements are under salary sacrifice). As a result, it may be possible to reclaim Class 1 NIC that is no longer due, providing evidence has been retained to support the actual business mileage each employee has driven.

The definition of RME can be found here.



Could I claim as an employer? 

If, as an employer, you believe your circumstances are similar to the Upper Tribunal cases mentioned above, you may be able to correct the position using Real Time Information (“RTI”) or in writing where an amendment under RTI is not possible, but only if you hold evidence in support on a period-by-period basis:

  • A list of employees to whom you pay a car allowance and their National Insurance numbers.
  • Details of the business miles undertaken by each employee and full evidence in support.
  • Records showing the amount of car allowance payments each employee received for each period.
  • Details of other RME payments the employees have received (e.g., mileage payments reimbursed at less than the HMRC approved rate) for each employee and in each period.
  • Details of the primary and secondary Class 1 NICs for each employee being reclaimed.



Could I claim as an employee? 

If you believe that you can reclaim Class 1 NICs in respect of RME, HMRC advises that you speak with your employer in the first instance, who can usually process the refund through the payroll. If the employer has not and does not intend to apply for a refund, you can apply for a refund by writing to HMRC if you hold the following information (to be provided on a pay period-by-period basis):

  • Information regarding the number of business miles you have driven.
  • The amount of car allowance payments that you have received.
  • Details regarding RME payments you have received (e.g., mileage payments received at a rate below HMRC approved rates).
  • Evidence of the primary Class 1 NICs that you are reclaiming.
  • The reason your employer is not applying for a refund on your behalf.
  • Your bank details where the refund should go.



Are there any other factors to consider? 

Employers and employees may be able to claim a refund of their NIC contributions for the past six years (e.g., a claim for the 2017/18 tax year would need to be made by 5 April 2024).

The need to gather information and evidence in support of a claim for repayment may appear to be quite labour-intensive. However, the possible refunds may well outweigh this administrative burden.



How we can help you 

At HB&O, we have a team of tax specialists who can advise you on the right course of action, whether you are an employee or an employer. If you would like to learn more and discuss how this affects you, contact us today.


Email: [email protected]

Phone: 01926 422292 


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