MWL International Ltd & Anor v The Commissioners for HMRC
[2024] UKFTT 402 (TC)
Laing O’Rourke Services Limited v The Commissioners for HMRC & Anor
10 July 2023
[2023] UKUT 155 (TCC)
Upper Tribunal
Two companies paid their employees car allowances regardless of how much they drove for work. The government argued they shouldn't get a tax break. The court decided the allowances were acceptable because they ensured employees had cars available for work, and therefore the companies were entitled to at least some tax relief.
Key Facts
- •Two appeals concerning Class 1 National Insurance Contributions (NICs) on car allowances paid to employees.
- •Laing O'Rourke Services Limited appealed a First-tier Tribunal (FTT) decision that it was not entitled to repayment of £2,228,892 in NICs.
- •HMRC appealed an FTT decision that Willmott Dixon Holdings Limited was entitled to repayment of £1,470,056 in NICs.
- •Both companies had car allowance schemes where payments were based on job grade, not mileage driven.
- •Key legal issue: interpretation of regulation 22A and paragraph 7A of the Social Security (Contributions) Regulations 2001 regarding the disregards of qualifying amounts (QA) from earnings.
Legal Principles
Earnings for NIC purposes include any remuneration or profit from employment, calculated according to regulations.
Social Security Contributions and Benefits Act 1992, section 3
Regulation 22A treats certain payments as earnings in connection with qualifying vehicle use (RME - QA).
Social Security (Contributions) Regulations 2001, regulation 22A
Paragraph 7A disregards the qualifying amount (QA) from earnings, calculated according to regulation 22A(4).
Social Security (Contributions) Regulations 2001, Schedule 3, paragraph 7A
Determining whether payments are earnings involves assessing whether they constitute a profit arising from employment (Donnelly v Williamson).
Case law: Donnelly v Williamson
Statutory interpretation requires consideration of the provision's purpose, context, and relationship with other provisions (Hurstwood Properties Limited v Rossendale BC).
Case law: Hurstwood Properties Limited v Rossendale BC
Outcomes
Laing's appeal allowed.
The FTT erred in narrowly defining 'relevant motoring expenditure' (RME). The car allowances, while not mileage allowance payments under ITEPA 2003, were RME under regulation 22A(3)(c) because they were 'in respect of the use' of a vehicle, even if not directly linked to actual mileage. The court found that Laing's payments were made to employees who did undertake business mileage.
HMRC's appeal in the Willmott case dismissed.
The FTT correctly held that Willmott's car allowances were RME under regulation 22A(3)(c) as they ensured employees had vehicles available for business use. The fact that some employees did not use the car for business purposes is irrelevant. The QA is disregarded under paragraph 7A.