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CASE REPORT: TRAVELLING EXPENSES NOT 'RELEVANT MOTORING EXPENDITURE'

The Upper Tribunal decided that motor travelling expenses paid by a taxpayer to its staff were not 'relevant motoring expenditure' but were emoluments of their employment liable for National Insurance contributions (NICs) so that the taxpayer was not entitled to a refund of contributions purportedly overpaid.

The taxpayer company was in the business of providing or placing apprentices and other trainees with employers and the supervision of their training. Its staff numbered about 200 of whom 160 or so were training advisers. The training

advisers had to visit the employers and the trainees at their places of work. They specialised in certain trades and as the training places were scattered over a wide area, the training advisers needed to do a lot of travelling in the course of

their duties. In practice, that could mostly only be done by car and motor travelling expenses were paid to the taxpayer's staff as necessary but most of it was paid to the training advisers.
In principle motoring expenses were paid according to two options, either as a straightforward mileage allowance payable at a rate of 40 pence per mile or as a smaller mileage allowance of 12 and later 13 pence per mile plus an annual

lump sum payable in monthly installments. An issue arose whether the taxpayer was right to pay NICs based on the lump sums, which it had done, or whether, as it now contended, it was not obliged to do so; with the consequence that it was entitled to reimbursement of the overpaid amount.

It was not in dispute that the mileage allowances of 12, 13 and 40 pence were correctly dealt with, as falling within reg. 22A(3)(a) of the Social Security (Contributions) Regulations 2001 (SI 2001/1004) as amended, and that the taxpayer did not need to pay NICs in respect of the payments of those mileage allowances. However, HMRC argued that the lump sums paid to the staff who qualified for them were paid as part of their wages and so fell outside the relevant motoring expenditure and NICs were payable in respect of those payments.

The scheme of reg. 22A was that any amount falling within para. (2) was treated as earnings if it would not otherwise be so treated. An amount was within para. (2) if it was 'relevant motoring expenditure' (RME) less any 'qualifying amount' (QA). The RME was defined in para. (3) and the QA in para. (4).

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