Insight: Grey fleet tax ruling could open floodgates to claims

A landmark tax ruling by the Court of Appeal on grey fleet mileage may open the floodgates to similar claims from fleets, according to the company that won the case.

Grant Thornton has spent seven years trying to persuade HM Revenue & Customs (HMRC) to refund a national insurance mile-age claim for its client Total People, a work-based training provider.

It thought it had won the case in 2010 before losing it on appeal in 2011, but now the Court of Appeal has ruled in favour of Total People.

Grant Summers, partner at Grant Thornton UK, said: “Our client is obviously delighted with the result.”

The level of refund has yet to be agreed, but Total People claimed it had overpaid £146,165 in National Insurance for the four tax years from April 5, 2003, to 2006.

Grant Thornton previously said the case could potentially cost the Treasury around £200 million, but HMRC told Fleet News that it will not result in a cash windfall for fleets.

“The Court of Appeal simply reinstates the decision of the Lower Tribunal which turned on its own particular facts,” said an HMRC spokesman.

“Lower Tribunal decisions do not set binding precedent. This case therefore sets no binding precedent for other people.”

The case concerns a National Insurance Contribution (NIC) refund claim based on the difference between HMRC tax and the NIC-free AMAP rate of 40p per business mile (now 45ppm) for employees using their own cars, and the 12ppm paid by Total People – now known as Cheshire Employer and Skills Development.

In addition to the 12ppm, Total People paid £300 a month to its training advisers, responsible for a large rural client base, for the business use of their cars.

This figure was based on the average cost of using a Ford Mondeo for 7,500 business and 7,500 private miles.

A small number of senior supervisors received £4,100 a year and two directors £7,000 a year. The company deducted PAYE tax and NIC from the monthly allowance, but not the mileage payment.

Total People’s NIC repayment claim was based on the 28ppm left within the allowable rates.

“Employees received tax refunds but HMRC refused Total People’s NIC claim,” explained Dave Jennings, a senior manager in the tax team at Grant Thornton’s Manchester office.

After several years of negotiations with HMRC’s NIC technical team, HMRC’s refusal to refund NIC was taken to the Lower Tribunal or first-tier tax tribunal (FTT) in August 2010.