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Total People to appeal car expenses ruling

12th Oct 2011
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A training provider will appeal against an upper tier tribunal ruling about travel expenses and tax relief. Nick Huber reports.

The upper tribunal ruling in Total People v HMRC (FTC/89/2010, July 2011) said that that lump sums given to employees who use their own cars for work must be linked to distance travelled in order to claim relief on national insurance contributions (NICs).

The dispute between Total People - now called Cheshire Employer and Skills Development (CEDL) - and HMRC is about whether the NIC relief for business travel could be used not only on a mileage rate but also on a lump-sum car allowance for employees.

Last year the lower tribunal ruled in favour of Total People, saying that the car allowance was a relevant motoring expense and therefore the NIC relief could be claimed.

But after an appeal by HMRC the upper tribunal has ruled that the payments did not qualify as relevant motoring expenditure and should therefore be treated as part of a remuneration package for tax purposes.

Judge Colin Bishopp ruled that the lump sums for employees were made in relation to employees’ car expenses, rather than as an addition to their earnings. But Bishopp added that the money CEDL paid its employees for motoring expenses paid “bore no relation, save by chance, to the scale of the use made by the employee of his car... it is difficult to see how a payment which is made irrespective of the number of miles covered can properly be said to be related to use."

Grant Thornton senior tax manager Dave Jennings, who worked on the case for Total People, said the organisation has asked permission to appeal to the Court of Appeal.

He said the upper tribunal’s ruling was “flawed” and should not have overturned the First Tier decision on the facts of the case. 

Alastair Kendrick, director at accountant MacIntyre Hudson said the tribunal ruling showed how complex car mileage tax rules are.

“We are seeing many concerns selling mileage capture and it is important that those providing this data are meeting the strict requirements of the regulations. Companies are advised to get HMRC clearance and to involve a tax specialist in this process," he said.

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By twickers
17th Oct 2011 12:23

Appeal- what a waste of time

Lump sum payments are always suspect and the question really is who advised ? to make 
such payments.  Genuine use of private motor and related expenses payments can and should always be linked to some record of use and vehicle involved/  the rules are quite generous not difficult to understand and these cases only raise increased possibility of having them changed-  which rarely turns out better..

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