Claiming back National Insurance on car allowances – HMRC update

Following a call on 1 November between the firm's Employment Tax team and HMRC’s national policy contact, we set out below some key insights we thought were worth sharing with you, building on our previous article and FAQs.

Summary of our call with HMRC on 1 November 2023

1. What does this mean and what can I claim back?

If you are an employer that has paid qualifying car allowances to colleagues and reimbursed them for business mileage below the Approved Mileage Allowance Payment (AMAP) rate of 45p per mile, a refund can be claimed on the Class 1 NICs (both Primary and Secondary) paid on car allowances where they qualify as Relevant Motoring Expense in the last six years. Additionally, there will also be a refund on any Apprenticeship Levy charge paid and interest on the amounts due.

2. How do I make a claim?

In our call, HMRC have outlined two preferred options for employers submitting claims.

1. Option 1 - To self-refund via Real Time Information (RTI) payroll reporting. This automated approach allows streamlined adjustment of tax deductions and minimises administrative effort.
2. Option 2  – Where RTI is not possible (e.g. due to a change of payroll system) – is to make a claim outside of your payroll software, e.g. via email along with an explanation of why the RTI method could not be utilised.

No advance clearance is required from HMRC before filing claims, however, HMRC may conduct reviews post-submission to check on the validity.

Therefore, submitting an explanatory protective application in advance of the claim offers maximum transparency and strengthens the basis of the claim, as well as will help protect for as long a period as possible where it might take some time to collect the relevant data required to accurately request/process the NIC reclaim.

When filing for a refund via RTI, HMRC have stated that it is necessary to submit an FPS amendment individually for each of the past six years under consideration. However, rather than correcting every single pay period within those years, we understand that a single adjustment at the tax year end suffices based on the compiled evidence.

3. How can we help me with a claim?

If you think this may apply to your business, we can help you:

• Assess whether you have a qualifying claim;
• Liaise with HMRC on your behalf; and
• Help support you with making a reclaim outside or inside RTI for the relevant periods.

To get this process started you can complete our online calculator here. By completing this we will be able to give you a high-level NIC Reclaim calculation for the past 6 years and our Employment Tax team will have a call with you for an initial consultation at no charge.

The Employment Tax team can aid you with preparing and submitting a robust NIC refund claim– if you are interested or would like further information, please do not hesitate to contact us below, or refer to our website which contains further guidance including FAQs from our clients.

Get in touch

Additionally, if you think this may apply to your business, you can complete our quick online form here. By completing this we will be able to give you a high level NIC Reclaim calculation and our Employment tax team will come back to you for an initial consultation at no charge.

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