The Court of Appeal judgement of 6 November is the latest in this long running tax case. The case is strictly known as Cheshire Employer and Skills Development Limited, but commonly known as Total People as that is a previous name of the business. The Court of Appeal has found in favour of the taxpayer. Whether HMRC will appeal this most recent decision is not known at this time.
Total People employed approximately 150 training advisors whose role was to visit business premises of certain employers. They therefore spent most of their time away from Total People’s offices and were required to undertake a significant amount of travel which was only practical if undertaken by car. The advisors were expected to use their own cars and were given an allowance for doing so. The allowance was to cover the wear and tear and depreciation as a result of using a car for business purposes.
For administrative convenience, and to approximately equate with anticipated mileage, some advisors were provided with a monthly car allowance and a modest mileage allowance. As well as administrative convenience this also had the benefit that it was a disincentive for staff to potentially maximise their business travel and therefore their mileage claims.
Total People argued that the car allowance was therefore no different from a tax free mileage allowance. The Court of Appeal accepted the Total People’s position and therefore, to the limit of the recognised mileage rates, the car allowance can be received free of income tax and national insurance.
Total People’s approach to mileage claims is not unique. There are many businesses that have the same, or similar, policies. Based on the recent judgement it should be possible for those businesses to make a claim to recover national insurance overpayments and for individuals to submit tax returns to recover income tax previously paid. These claims will be under the error or mistake provisions of the tax administration legislation.
National insurance claims should be made by the end of the tax year. Due to the administrative process accompanying income tax claims it may be necessary for the employees to resubmit income tax returns before 31 January 2013.
The information in this article was correct at the date it was first published.
However it is of a generic nature and cannot constitute advice. Specific advice should be sought before any action taken.
If you would like to discuss how this applies to you, we would be delighted to talk to you. Please make contact with the author on the details shown below.
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