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NIC refund claims on Relevant Motoring Expenses (RME)

5 June 17 | By: Jas Jhooty


In recent weeks we have seen HMRC seek to ramp up the pressure on organisations who have made protective claims for NIC refunds in relation to motoring expenses. We are therefore inviting readers to share and collaborate their experiences, in order to ensure that this (in our view, unjustified and aggressive) HMRC approach may be addressed.


NIC legislation provides exemption for Relevant Motoring Expenses (RME), although the precise extent of the relief may be open to debate. In a typical example, an employee will be paid a regular monthly ‘car allowance’ plus a mileage allowance which will cover only fuel costs (say 15p per mile), but most employers will only apply NIC exemption to the fuel allowance. Therefore some years ago, an employer (CESDL, formerly known as Total People Ltd) sought to claim NIC exemption for RME, on the difference between the Approved Mileage Allowance rate (currently 45p per mile) and the fuel-only rate (i.e. NIC exemption on 30p per business mile in this example).

CESDL was successful in its claim, when the Court of Appeal gave its judgement in late 2012. Whilst not appealing further, HMRC then took the surprising decision not to process any similar NIC refund claims outstanding. The justification offered was that the CESDL case ‘turned on its own facts’ and therefore does not create legal precedent. Off the record there was a suspicion that HMRC presented its facts and arguments poorly at the initial Tribunal Hearing. If so, that was HMRC’s own fault! The Court of Appeal decision clearly does create a precedent, even though HMRC ‘does not like it’.

Most employers were therefore left with little option than to simply record a protective NIC refund claim which would apply in the event that HMRC was later persuaded to accept the CESDL case principles at face value, or that another later case would be taken creating additional binding legal precedent. Not surprisingly, many employers were reluctant to elect to be that new test case (the costs would be significant, as it may have to go all the way to the Supreme Court in order to override or confirm the CESDL precedent).

Recent Developments

We have recently observed HMRC writing to employers to update this matter. Such letters adopt the pretext that HMRC is seeking to establish and make refunds where due. However we have not identified any particular cases where refunds have been made (or even that HMRC is prepared to specify in what exact circumstances a refund will be considered, e.g. to what extent the facts need to be shown to be on all fours with the CESDL case). The reality in practice is that HMRC is putting pressure on the employer to drop its protective claim, unless the employer is prepared to undertake enough detailed analysis to permit a formal decision to be made, in which case HMRC could then embroil the employer in a lengthy and costly follow up contentious appeal.

emTax’s view

We believe that HMRC’s approach is unnecessarily aggressive, in effect trying to ‘pick off’ employers one by one, by seeking to force them either to drop their claim or to undertake a great deal of further work, in order to seek to tidy up a mess of the Department’s own making. Most employers we have spoken to are happy for the protective claims to simply remain in abeyance, and we believe that HMRC has no right to be anything other than circumspect, in this scenario.

We would be interested to hear from our readers as to whether they have received similarly insistent demands from HMRC, and if so, how these matters are being handled. There is a lot to be said for maintaining a consistent approach, and we are happy to share our own experiences (confidentiality assured). Please do not hesitate to contact us either to register new claims or as part of a coordinated response on existing claims, as appropriate.


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