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Employee and employer NICs on car allowances

We have received a direct query from a reader regarding the practicalities of dealing with this opportunity on an ongoing basis and thought the response would be of interest to other readers.

This is a very new case which has not been widely publicised and we are finding many within the industry haven't been aware of the opportunity.

Because it is so new, there is no prescribed way to deal with making a reclaim or of ensuring you don't overpay employee and employer NICs on an ongoing basis. We advise asking your employees to keep mileage records as evidence of business mileage and submitting these to the company along with any expense claims at the end of each month on an ongoing basis.

You should calculate the mileage costs based on the Revenue's approved rates which are 40p for the first 10,000 business miles and 25p per business mile thereafter. At this level, the mileage reimbursed to employees is not liable to employer's or employee's NI. Then, because you have been keeping records of employees' business mileage, this information can be linked to the company's P11D process and you can advise each employee individually of the tax relief they can claim back on their personal tax returns, in addition to the NIC relief obtained through the payroll.

It is possible to reclaim for previous years and we suggest this is dealt with on the same basis as far as records allow. I hope this answers all your questions and would be very happy to talk to you in more detail if you have further queries. I have been working on this with a number of clients since this opportunity came to light and it is proving very worthwhile for them in terms of amounts to be reclaimed.

If anyone has any other queries post them below and we'll respond or email us directly - pw@rjp.co.uk. Paul Webb, RJP