Tax and the National Insurance treatment of car allowances

The potentially landmark First-tier Tribunal decision in Laing O’Rourke Services Ltd (TC8161) (Laing)concerns whether car allowances are earnings and what disregards are available for National Insurance purposes for business mileage driven by employees.

In 2010 the taxpayer victory in Total People Ltd (TC661) established a principle that car allowances are not necessarily earnings and National Insurance relief is available to staff in the same way as approved mileage allowance payments (AMAPS) relief – previously known as the fixed profit car scheme.

The Court of Appeal upheld that decision and since then we have waited ten years for a new test case to re-examine the principles. Laing is the first in a series of such cases – Laing lost this round but may well decide to appeal.

The eventual outcome of Laing and the other cases matters because it could have a direct financial bearing...