Twenty companies have shown interest in joining legal action against HM Revenue and Customs (HMRC) that could see them each recoup up to £1 million in ‘wrongly paid’ National Insurance Contributions (NIC) on car allowances.
However, following two London seminars held in the build-up to potentially launching the case against HMRC, those leading the initiative say there is scope for at least “one or two more major corporates” to join the class action – also known as a group litigation order (GLO).
Tax and pension specialist Innovation Professional Services is working with lawyers Wright Hassall & Co and Hage Aaronson to put together the class action, which may be on a ‘no win, no fee’ basis.
John Messore, partner and director of Innovation Professional Services, said: “The case is a once-in-a-lifetime opportunity because the decision will be binding only on those taking part and so anyone who adopts a wait-and-see attitude is missing out forever.”
The action follows the same lines as the much-publicised case by Total People, now known as Cheshire Employer and Skills Development, which it won in the Court of Appeal in 2012.
Its seven-year legal battle involved an NI refund claim based on the difference between the HMRC 40p per mile allowable rate (now 45p) 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.
The value of the amount claimed was approximately £146,000, or about £1,000 per employee involved.
Based on that figure, it is estimated that those employers represented at the two London seminars in December could each be in line for payouts of between £500,000 and £1m.
However, if the class action is won and HMRC pays out, experts say the potential cost to the taxman would be small compared with the cash amount that could be collectively at stake across the UK.
In the run-up to the seminars it had been estimated that the potential impact of the planned case against HMRC could be claims collectively amounting to between £200 million and £500m.
Messore said: “Legal advice from our counsel is that we have an excellent case. However, there is still time for other corporates to join the group and we will be meeting again early in 2014.
“The case potentially applies to every single company in the UK. Anyone with a sizeable number of cash allowance drivers – over say 500 – should be involved.”
Representatives of companies that attended the recent seminars – and any newcomers wishing to join the class action – will meet again with Messore and legal advisers in London within the first two months of the New Year.
From that meeting, details of each company’s claim against HMRC will be put together based on accurate mileage records and the number of employees involved.
In addition, a cost-sharing agreement must be reached and those companies involved will require board approval to take the case to court.
Messore said: “We will put the legal wheels in motion that will potentially see an attempt to obtain repayment from HMRC being pulled together by mid-year 2014, with the hearing at the First Tier Tribunal possibly taking place in mid-2015.
“We are optimistically confident that we would win at the tribunal, but HMRC will almost certainly appeal.
“However, we anticipate we would win that appeal, although HMRC would ask for leave to appeal to the Court of Appeal. But our lawyers can see arguments why that right could be denied and by the end of 2016 we hope to reach a landing whereby our group should get the repayment from HMRC to which they are entitled.”
Julie Jenner, director of fleet-decision-makers’ organisation ACFO, said: “We are monitoring the situation on behalf of our members and await developments with interest.”