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In Total People Ltd, the First-tier Tribunal decided the lump sum payments were payments of motoring expenditure. HMRC had argued that there was no clear link between the payments made and the actual use of the vehicle by the individual employees, therefore the sums made were effectively additional salary and liable to Class 1 National Insurance.
The taxpayer company had insisted that, as the payments were made to employees in recognition of the fact that their job required them to use their car for business, they constituted relevant motoring expenditure.
HMRC has been granted permission to appeal the decision to the Upper Tribunal.
Meanwhile, taxpayers should be aware that the First-tier Tribunal’s decision does not form a legal precedent: for the Revenue to accept that a payment is relevant motoring expenditure, a clear link must exist between the payment made and the actual use of the vehicle.
The department says its view has not changed as a result of the tribunal’s decision, and other claims for refunds will be judged on their own facts.
