A group of 30 companies are currently considering class action as a group to claim back overpaid NICs – going back six years – relating to the payment of employees’ car allowance and business mileage payments according to Accountancy Live say Harris & Co accountants Northampton
The companies are currently in discussion with tax consultancy Innovation Professional Services, together and law firm Joseph Hage Aaronson, who are working on a proposed group litigation order to reclaim overpaid over the six period.
According to the tax consultancy, inadequate internal systems and reporting mechanisms had resulted in several companies failing to structure employees’ car allowance and business mileage payments in a tax-efficient way, causing them to miss out on opportunities to save on tax and NIC payments at source, according to research by tax consultancy Innovation Professional Services.
According to precedent set out through a 2012 Court of Appeal decision in Cheshire Employer and Skills Development Ltd (formerly Total People Ltd) v R & C Commrs 2012 EWCA Civ 1429, NICs are not due on car payments where the payments are genuinely intended to reflect the cost to the employee of using their own car for business purposes and the employer paid less than the 40p (now 45p) HMRC allowable rate.
However, according to John Messore, partner and director of Innovation Professional Services, many corporates, even those whose employees drive thousands of miles a year on business, continue to be paying tax needlessly.
Messore says the aim is to bring together up to 30 companies in the class action, and estimates the average claim for each company as around £500,000. Any such action is likely to cost between £1m to £1.5m to prepare and requires all the companies involved to secure board agreement to submit a repayment claim to HMRC and to take part in any subsequent tribunal appeals. This process could start as early as mid 2014.
‘They may have lots of disparate divisions, making it hard to pull all the records together, or they are using paper-based systems which makes it difficult to collect or manipulate the necessary data,’ said Messore.
‘This is a one off opportunity to deal with retrospective claims. But many companies can start to make tax savings immediately, if they have the right kind of online, real time mileage system which allows them to record and verify business mileage for each employee accurately and document this with full traceability,’ Messore said.