If you pay a round sum car allowance to employees have you claimed your National Insurance Refund?

Tax relief can be claimed from HMRC for National Insurance paid by a business on round sum motoring allowances paid to employees.

Cars on road

HMRC have confirmed that they are not going to appeal a ruling made by the Upper Tribunal on cases bought by Laing O’Rouke and Wilmott Dixon – opening the doors to refunds to all businesses which have paid similar allowances to their employees.

It is now agreed that these car allowances paid to employees are ’relevant motoring expenditure’ and therefore qualify for relief from Class IA National Insurance contributions.

What is the impact of this decision?

National insurance contributions paid by employers on these allowances should not have been paid – and can be reclaimed from HMRC. The repayment reported as due to Laing O’Rouke is £2.2m.

For a business paying 50 employees a car allowance of £500 per month, the refund would be £41,400 for 2023/24, and £43,900 for 2022/23. Laing O’Rouke’s claim is for the period from 2004/5 so it is clear the repayments due may be substantial for all businesses.

Heather Powell, Head of Property & Construction at Blick Rothenberg, commented:

“In the real estate sector, payment of round sum allowances became far more attractive to employees as the personal tax cost of having a company car increased substantially. House builders, construction companies and professional services who have paid these round sum allowances should be reviewing their payroll records and, if round sum allowances have been paid, ensure that they submit a claim for refund.”