Total People to appeal travel expenses ruling

A TRAINING PROVIDER is to appeal a tribunal ruling that lump sums given to employees for car usage must be linked to distance travelled or be eligible for National Insurance.

The lower tribunal had earlier ruled that lump sums given to employees by Total People training providers – now called Cheshire Employer and Skills Development – for travel expenses were not eligible for National Insurance.

However, following an appeal by HM Revenue & Customs, the upper tribunal ruled that the payments did not qualify as relevant motoring expenditure and must therefore count as part of a remuneration package.

Judge Colin Bishopp found that the lump sums for employees were not linked to salary increases. However, he said that the definition of relevant motoring expenditure under social security regulations shows that “there must be some link between the payment and the miles driven”. The lower tribunal failed to determine this link when ruling in favour of Total People, he said.

“The sums paid bore no relation, save by chance, to the scale of the use made by the employee of his car… it is difficult to see how a payment which is made irrespective of the number of miles covered can properly be said to be related to use,” Bishopp said.

Dave Jennings, tax investigations senior manager at Grant Thornton, who worked on the case for Total People, said the organization would appeal the decision. The regulations do not distinguish between the use of the car for business and personal use and therefore the lump sums were for the up-keep of the cars.

However, Alastair Kendrick, director of employment tax at MacIntyre Hudson, said any other decision would have “undermined HMRC’s whole approach to National Insurance”. Companies were beginning to market tax avoidance schemes using the lower tribunal ruling, he added.

“I believe this is a reminder that the rules are complex and failure to comply with these can leave an employer exposed. We are seeing many concerns selling mileage capture and it is important that those providing this data are meeting the strict requirements of the Regulations. Companies are advised to get HMRC clearance and to involve a tax specialist in this process,” he said.

Related reading