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Car allowances and NIC


Published: 14 Dec 2023 Update History

HMRC updates its approach on the national insurance contributions (NIC) disregard for relevant motoring expenditure following Upper Tribunal decision.

HMRC has published articles in Employer Bulletin and Agent Update following the Upper Tribunal decision in Laing O’Rourke and Wilmott Dixon

The crux of that decision is that where an employer pays a fixed sum car allowance and reimburses actual business mileage at a rate of less than 45p per mile, car allowance payments that have been or will be made for use of a qualifying vehicle can benefit from an NIC disregard because they are classed as relevant motoring expenditure.

The articles set out the evidence that is required and how to correct the overpayment of NIC by employers. Employees may also claim a refund of primary class 1 NIC if their employer has not applied for a refund. 

HMRC’s articles are focused on correcting the historic position. However, employers should also ensure that the NIC disregard is correctly applied to future car allowance payments. 


ICAEW and Tax Faculty members can read more: 

NIC relief for employees with car allowances | ICAEW  

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