National Insurance savings opportunities for employers and employees following recent tax case

UNW news /  15 September 2023

Following a recent NIC Upper Tribunal involving the payment of car cash allowances and mileage rates at a rate of less than 45p per mile, there are now the following opportunities for employers:

  • Obtain a NIC refund for themselves for the last six tax years;
  • Obtain an associated refund of employees’ NIC for the last six tax years;
  • Structure their car cash allowance so that it is more tax and NIC efficient for future tax years; and
  • Help employees obtain tax refunds for the last four tax years.

What conditions need to be met for the opportunity to apply?

The opportunities exist where the following fact pattern is, or has been, in place:

  • The employee has been paid a cash allowance in lieu of a company car which is paid via payroll; and
  • The business mileage rates paid to those employees who receive the cash allowance is less than 45p per mile.

Where both facts exist, it may be possible for an employer to make a claim for overpaid NIC and look to put in place arrangements which make the payment of their cash allowances more NIC-efficient. The strength of a claim will, however, be dependent on the wording of any documentation relating to the car allowance and mileage allowance.

How much can the employer save?

Employers may be able to reclaim Secondary National Insurance (13.8%) costs on the difference between the business mileage rates they have paid to employees who travel in their own car and the statutory rate (45p per mile).

As an example, where an employer has employees who have travelled a total of 100,000 business miles and are paid the Advisory Fuel Rates (AFRs) in each tax year, the total employer and employee NIC repayment could be in the region of £49,000.

As the employer and employee could also receive ongoing NIC savings, the potential to make the cash allowance more efficient can be significant.

How can UNW help?

UNW’s award-winning employment taxes team has extensive experience of helping employers in:

  • Review of car scheme documentation to provide a technical analysis and an understanding of the strength of a successful claim;
  • Preparing or auditing the refund claim;
  • Contacting HMRC to make the claim and negotiating on the information required;
  • Setting up the cash allowance arrangements for the future to obtain monthly savings; and
  • Setting up tax compliant mileage capture systems and policies.

If you would like to discuss how we can help you, or have any other employment taxes related queries, please get in touch with us at