HMRC Loses Battle over NI on Car Allowances

A recent court decision ruled that HMRC was wrong to charge national insurance on round sum car allowances. But HMRC is unlikely to offer a refund where you’ve overpaid, what steps do you need to take to get your money back?

HMRC’s view of round sums

HMRC has always taken the view that both employees’ and employers’ NI is payable where a fixed car allowance is paid, unless this is directly linked to the amount of business mileage travelled. Only where it’s directly linked to mileage is the first 45p per mile of a car allowance NI-free. This stance of HMRC was challenged by the court of appeal.

The judges said that the HMRC had misinterpreted the law when he insisted the NI exemption can only apply where there’s a link to mileage at the time a car allowance was paid. They considered it sufficient that an allowance is broadly tailored to reflect the scale of a car’s business use. Here are some examples of when the NI-free amount can apply.

If you have any trouble with any tax matter whether it is NI or corporation tax, contact KVS Accountants for tax advice. KVS acts as tax advisors in Wimbledon, Earlsfield, Wandsworth, Battersea, Hammersmith, Fulham, Kensington and London


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