This is a good summary but in determining a claim with HMRC it is my understanding that you would need to proceed under Regulation 22. This requires that when looking at each earnings period for a particular employee that a claim for RME can be made. HMRC have historically taken the view that Regulation 22 precludes the making of a claim for RME if there had already been a claim made for that same earnings period.
I appreciate this adds to the complexity but it is in accordance with the rules and employers who wish to side step this would need to obtain HMRC approval
I represented this client and have noted the summary which is in the article above. Sadly this does not cover off all the prevailing facts and what happened in practice. It is a very complex and drawn out matter.
It is correct to say a 3 day hearing was adjourned at the request of HMRC in November 2022 at short notice (less than 48 hours). The reason the adjournment was sought was because the assigned HMRC representative did not want to travel to Birmingham for the hearing and there were concerns by HMRC that their evidence bundles needed some tidying up. On granting the adjournment the Judge was critical of the bundles prepared by HMRC and asked them to update these and for them to provide copies for me to review before these got circulated.
The claim for costs related to the time taken preparing for the abortive hearing and the review of the bundles and attending a hearing when HMRC requested the adjournment. The Judge summoned me to attend this.
In claiming these costs HMRC asked for these to be submitted and on chasing for payment I was told the only way the client could pursue this was by way of a formal complaint. This was made to the appropriate address provided by HMRC with the necessary evidence.
No payment was forthcoming at the time of the re-arranged hearing and the Judge then directed that a claim for costs would be considered by the FTT. In considering the claim the Judge seems to have supported HMRC suggesting the documentation was not correctly filed despite the point that the approach adopted had been prescribed by HMRC Solicitors Office.
There are ongoing discussions with HMRC on this matter so I do not want to comment further but the article is a good reminder that you need to ensure you follow the correct process in these matters irrespective of what HMRC may tell you to do.
The truth behind this is issue is that there is no debate the limits for the approved mileage allowance payments should be increased significantly.
The tax free limit needs to be calculated (based on the historical basis) being the average cost per mile of running a vehicle. Historically the rate was calculated using the AA rate but it was found this sum included some non- allowable capital costs like those relating to having a garage to park the car.
Certain industry groups suggest it should be calculated just on the added cost of the particular mileage on business so just cost of petrol ignoring other running costs eg servicing/insurance. This is not in accordance with the HMRC historical approach and not fair
Sadly there are a number of groups campaigning for no increase to the mileage rate because they fear if it amended it will discourage people from having a company car. These groups seem to be winning the day in their campaigning to HMRC
The summary does not fully cover the implications of this particular Judgement. National Insurance is calculated by reference to earnings periods so if an employee is on a monthly pay then this is the earnings period. An employer would need to take the car allowance payable for that earnings period together with any other relevant motoring expenditure and determine the NIC impact.
The case did not appear to consider that the specific Regulations limit the NIC relief so that once a relevant motoring expense is claimed for an earnings period an additional claim for that period cannot be made. So if these drivers had made claims and in light of this decision a further claim is made it would be interesting to see if HMRC will permit.
So this is a great result and John deserves congratulating there are still questions not answered about the complexities. There is also of course the possibility of an appeal by HMRC against the decision.
They are massively below what they should be but the Government seems not to be minded to revise.
The trouble is some think that the mileage rate should be on the marginal cost to the employee of them using a vehicle for business travel. However, how the rate is determined is based on the total costs of motoring divided by the mileage . On that basis 45p is totally below what it should be
Ian
The AMAP rules succeeded what was called the fixed profit car scheme((FPCS) and you need to go back to these to gain answers to some of your questions. The approved mileage rate was calculated historically by reference to the AA rates but taking out capital costs like garaging. The current rate remains unchanged for some years but there seems no desire by the Government to increase.
The FPCS required a return to be submitted of excess approved mileage paid to employees and that excess was coded out. Such arrangements still exist in parts of the public sector but are rarely seen in the private sector.
This decision is at odds with the historical approach of HMRC and it would be interesting to see if the decision would be supported on appeal. HMRC have always taken the view that with PAYE when this is deducted by the employer it is deemed to have been paid. This is in contrast to the rules under CIS which sees the payment to be a payment in the name of tax which is only tax when paid over to HMRC.
Clearly the circumstances in this case seem complex which may add to a change in the position but it would be worrying if HMRC was looking to change their historical position
This is not unusual and HMRC are using data from intermediaries in which to test that the income of a business appears correctly reported. I have seen this with dog breeders and HMRC checking their income against the amounts insured for those pets with pet insurers.
It is important that just because HMRC have information from a third party does not for direct tax constitute a discovery under S29 TMA 1970. It will be necessary for an inspector to demonstrate there is a flaw in the accounting records of the business. the position is not however, the same for VAT
I accept that the case put forward by Rebecca is very strong. Those employers reading this article need to be aware that there are other considerations which need to be taken into account when looking at providing electric cars via a salary sacrifice scheme to employees. The main factor to take into account is the impact of early termination payments on the financial viability of such an arrangement. If you provide a car on a salary sacrifice scheme and the employee decides to resign during the period of the leasing arrangement then the early termination costs payable to the lessor can be considerable.
If the lessor is providing early termination insurance under the arrangement it is worth checking that the cover does include all eventualities. it is often the case that this will only pay out in limited circumstances.
I am aware others have been told that in the circumstance of an employee leaving during the period of the lease they would expect the employee to meet the early termination costs. But in reality this is unlikely to be able to be enforced given the potential size of the payment. Before considering this option I suggest the employer should consult with an employment lawyer
My answers
But to avoid confusion a double cab only qualifies for the van benefit in kind if the kerb weight is sufficient.
This is a good summary but in determining a claim with HMRC it is my understanding that you would need to proceed under Regulation 22. This requires that when looking at each earnings period for a particular employee that a claim for RME can be made. HMRC have historically taken the view that Regulation 22 precludes the making of a claim for RME if there had already been a claim made for that same earnings period.
I appreciate this adds to the complexity but it is in accordance with the rules and employers who wish to side step this would need to obtain HMRC approval
I represented this client and have noted the summary which is in the article above. Sadly this does not cover off all the prevailing facts and what happened in practice. It is a very complex and drawn out matter.
It is correct to say a 3 day hearing was adjourned at the request of HMRC in November 2022 at short notice (less than 48 hours). The reason the adjournment was sought was because the assigned HMRC representative did not want to travel to Birmingham for the hearing and there were concerns by HMRC that their evidence bundles needed some tidying up. On granting the adjournment the Judge was critical of the bundles prepared by HMRC and asked them to update these and for them to provide copies for me to review before these got circulated.
The claim for costs related to the time taken preparing for the abortive hearing and the review of the bundles and attending a hearing when HMRC requested the adjournment. The Judge summoned me to attend this.
In claiming these costs HMRC asked for these to be submitted and on chasing for payment I was told the only way the client could pursue this was by way of a formal complaint. This was made to the appropriate address provided by HMRC with the necessary evidence.
No payment was forthcoming at the time of the re-arranged hearing and the Judge then directed that a claim for costs would be considered by the FTT. In considering the claim the Judge seems to have supported HMRC suggesting the documentation was not correctly filed despite the point that the approach adopted had been prescribed by HMRC Solicitors Office.
There are ongoing discussions with HMRC on this matter so I do not want to comment further but the article is a good reminder that you need to ensure you follow the correct process in these matters irrespective of what HMRC may tell you to do.
The truth behind this is issue is that there is no debate the limits for the approved mileage allowance payments should be increased significantly.
The tax free limit needs to be calculated (based on the historical basis) being the average cost per mile of running a vehicle. Historically the rate was calculated using the AA rate but it was found this sum included some non- allowable capital costs like those relating to having a garage to park the car.
Certain industry groups suggest it should be calculated just on the added cost of the particular mileage on business so just cost of petrol ignoring other running costs eg servicing/insurance. This is not in accordance with the HMRC historical approach and not fair
Sadly there are a number of groups campaigning for no increase to the mileage rate because they fear if it amended it will discourage people from having a company car. These groups seem to be winning the day in their campaigning to HMRC
The summary does not fully cover the implications of this particular Judgement. National Insurance is calculated by reference to earnings periods so if an employee is on a monthly pay then this is the earnings period. An employer would need to take the car allowance payable for that earnings period together with any other relevant motoring expenditure and determine the NIC impact.
The case did not appear to consider that the specific Regulations limit the NIC relief so that once a relevant motoring expense is claimed for an earnings period an additional claim for that period cannot be made. So if these drivers had made claims and in light of this decision a further claim is made it would be interesting to see if HMRC will permit.
So this is a great result and John deserves congratulating there are still questions not answered about the complexities. There is also of course the possibility of an appeal by HMRC against the decision.
They are massively below what they should be but the Government seems not to be minded to revise.
The trouble is some think that the mileage rate should be on the marginal cost to the employee of them using a vehicle for business travel. However, how the rate is determined is based on the total costs of motoring divided by the mileage . On that basis 45p is totally below what it should be
Ian
The AMAP rules succeeded what was called the fixed profit car scheme((FPCS) and you need to go back to these to gain answers to some of your questions. The approved mileage rate was calculated historically by reference to the AA rates but taking out capital costs like garaging. The current rate remains unchanged for some years but there seems no desire by the Government to increase.
The FPCS required a return to be submitted of excess approved mileage paid to employees and that excess was coded out. Such arrangements still exist in parts of the public sector but are rarely seen in the private sector.
This decision is at odds with the historical approach of HMRC and it would be interesting to see if the decision would be supported on appeal. HMRC have always taken the view that with PAYE when this is deducted by the employer it is deemed to have been paid. This is in contrast to the rules under CIS which sees the payment to be a payment in the name of tax which is only tax when paid over to HMRC.
Clearly the circumstances in this case seem complex which may add to a change in the position but it would be worrying if HMRC was looking to change their historical position
This is not unusual and HMRC are using data from intermediaries in which to test that the income of a business appears correctly reported. I have seen this with dog breeders and HMRC checking their income against the amounts insured for those pets with pet insurers.
It is important that just because HMRC have information from a third party does not for direct tax constitute a discovery under S29 TMA 1970. It will be necessary for an inspector to demonstrate there is a flaw in the accounting records of the business. the position is not however, the same for VAT
I accept that the case put forward by Rebecca is very strong. Those employers reading this article need to be aware that there are other considerations which need to be taken into account when looking at providing electric cars via a salary sacrifice scheme to employees. The main factor to take into account is the impact of early termination payments on the financial viability of such an arrangement. If you provide a car on a salary sacrifice scheme and the employee decides to resign during the period of the leasing arrangement then the early termination costs payable to the lessor can be considerable.
If the lessor is providing early termination insurance under the arrangement it is worth checking that the cover does include all eventualities. it is often the case that this will only pay out in limited circumstances.
I am aware others have been told that in the circumstance of an employee leaving during the period of the lease they would expect the employee to meet the early termination costs. But in reality this is unlikely to be able to be enforced given the potential size of the payment. Before considering this option I suggest the employer should consult with an employment lawyer