HMRC won’t appeal NI decision

Published: 20th September 2023

The Upper Tribunal (UT) simultaneously considered two similar but unconnected disputes: Laing O’Rourke Services Ltd (L) v HMRC and Willmott Dixon Holdings Ltd (W) v HMRC . Both companies paid their employees car allowances which HMRC argued were earnings liable to Class 1 employees’ and employers’ NI. L and W argued that the special rules overrode the normal earnings rule so that the payments should be disregarded for NI purposes.

The UT confirmed that the car allowances were earnings. In respect of the “disregard” rules, it could not find anything that required payments to be reimbursement of motor expenses already incurred. In fact, when the NI rules were created they were intended to mirror the tax rules as far as possible, and they apply the exemption regardless of timing. In reality, motor expenses, apart from fuel, tend to be incurred sporadically, e.g. insurance, servicing, so to limit the tax and NI exemption to expenses already incurred would be illogical and defeat the purpose of the rules. The UT therefore ruled for L and W and against HMRC, which has now confirmed it will not appeal the decision.

By confirming that it won’t appeal, HMRC has opened the door to NI refunds going back six years. It is possible that the rules will be changed to prevent claims for future years though.

hmrc won't appeal ni decision
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