HM Revenue and Customs (HMRC) has insisted that a ruling at the Court of Appeal involving grey fleet mileage claims does not form a legal precedent and will not result in it having to hand back millions of pounds in tax to fleets.
Total People – now known as Cheshire Employer and Skills Development – successfully overturned a previous decision in favour of HMRC on Tuesday (November 6).
Grant Thornton UK LLP has fought the refund claim for the last seven years on behalf of Total People and Tuesday’s decision restores the finding of the first-tier tax tribunal (FTT) in August 2010 in favour of Total People and sets aside the opposing decision of the Upper Tribunal (UT) in August 2011.
The case relates to a national insurance refund claim based on the difference between the HMRC 40p per mile allowable rate and the 12p per mile paid by the employer plus an additional lump sum paid to the employees for using their private cars on business.
At the Court of Appeal, HMRC made a new contention that even if the lump sum payments were not paid as salary they were earnings because they were over generous and involved a profit element for the employees.
Total People's appeal was based on the point that the UT made an erroneous judgement and that the FTT concluded correctly in its favour.
The Court of Appeal judges concluded that the FTT had made no error in law and therefore the UT had no jurisdiction to overturn the FTT decision.
Lord Etherton said that Total People's "scheme for travelling allowances is not an abusive one" and that "critically, it found as facts that the scheme was a bona fide scheme, that the lump sum element was designed precisely in order to prevent staff making a personal profit by maximising their travel on a 40p per mile basis" and that the FTT was fully entitled to conclude that "the lump sum payments were not earnings".
Grant Summers, Partner, Grant Thornton UK, said: "The Court of Appeal has re-reviewed this complex issue from first principles and reached a convincing conclusion to this long running saga. Our client is obviously delighted with the result."
However, HMRC told Fleet News that this latest decision in favour of Total People does not form a legal precedent.
A spokesman continued: “HMRC does not intend to make repayments to any other customers based on the outcome of this case. HMRC considers that taking a similar case now it would be likely to succeed.”
See the next edition of Fleet News for detailed analysis of the decision and what it may mean for fleets.