“At the FTT the judge decided in favour of Total People – that the monthly allowance was not earnings and allowed the repayment,” explained Jennings.

HMRC appealed and the Upper Tribunal overturned its decision and agreed with HMRC that the allowance was not a relevant motoring expenditure and therefore was earnings with no NIC refund due.

But the Court of Appeal now says that the allowance was not “obviously abusive” and “there is no doubt that employees did incur expenditure for business travel in their cars”.

HMRC argued the allowance was over generous, not linked to specific costs and employees could profit from it.

However, the court allowed Total People’s appeal on the grounds that a broad brush approach is satisfactory and the FTT concluded the lump sum allowance was not earnings.

Grant Thornton argues that providing there is evidence of a genuine endeavour to offer an allowance equivalent to expenditure, an NIC refund claim should be accepted by HMRC.

There should be no link to salary and the allowance should not be a reward.

“A claim can be made for all tax years from April 6, 2006, until April 5, 2013, when 2006/2007 will fall out of date under the six-year claim rule,” said Jennings.

“Accurate employee business mileage records will be required and the claim should normally be calculated on a pay period basis.”

Jennings recognises that HMRC will take a robust approach to other repayment claims, but he said it’s “also very hard for HMRC and the tribunals in any other similar case to ignore the Court of Appeal completely”.

Alastair Kendrick, tax director at MHA MacIntyre Hudson, doesn’t believe this decision will significantly impact on the National Insurance take on business mileage across the UK tax base.

However, he told Fleet News that it does have “serious implications” across the whole basis in which National Insurance is calculated.

“We do not anticipate that HMRC will let this matter rest,” he said.

“Given the legal process, there is a strong likelihood that HMRC will look to take other cases to try to close down this loophole and, if this does not succeed, revise the NI rules to support their view.”

A number of UK companies have already lodged protective claims over NIC on grey fleet mileage.