Laing O’Rourke has lost a £2.2 million claim for relief on grey fleet business mileage payments paid to employees at the firm.

The first-tier tribunal decision comes almost 10 years after the Court of Appeal ruled in favour of Total People (now Cheshire Employment and Skills) on a similar National Insurance Contributions (NICs) claim.

Total People’s seven-year legal battle related to an NI refund claim based on the difference between the HMRC 40p per mile (ppm) approved mileage allowance payment (AMAP) rate (now 45p) and the 12ppm 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 around £1,000 per employee, which was subsequently paid by HMRC.

In what was seen as the first test case following Total People’s victory at the Court of Appeal in 2012, Laing O’Rourke argued that its car allowance scheme should also qualify for relief from NICs on payments made to employees.

HMRC said relief did not apply, because the payments could not be defined as relevant motoring expenditure. After the evidence was heard in court in February, Judge Tracey Bowler reached a decision last month, ruling in favour of HMRC.

John Messore, managing partner at specialist consultants Innovation Professional Services, said: “Laing O’Rourke had not sufficiently demonstrated that the car allowances paid were in respect of the use of the employee’s car and therefore did not fall into the definition of relevant motoring expenditure.”

The judge said that the burden of proof lay with Laing O’Rourke and, if it had been able to show that the car allowance was a payment made in respect of the use of the car, then NIC relating to the business mileage element would have been due back to the company.

A Laing O’Rourke spokesperson said: “We are considering the judgement of the first-tier tribunal and do not wish to comment further at this stage.”

It has until August 3 to apply for permission to appeal, 56 days from when it received the tribunal decision. However, if Laing O’Rourke appeals the first-tier tribunal decision, it will not be able to introduce any new witnesses, new facts or new arguments.

That was open to the company at the first-tier tribunal stage, but the appeal, which would be heard in an upper-tier tribunal, will simply be another judge deciding whether, given the evidence that was presented at this stage, the verdict reached was reasonable.

Out of 250 companies that put in so-called protective claims in the wake of the original 2012 Total People decision, around 200 have pulled out of the process, according to Messore.

HMRC finally decided to give one of the remaining claimants the opportunity to have its day in court when it issued Laing O’Rourke with a Section 8 determination, ruling that the company’s cash allowance did not qualify as relevant motoring expenditure.

Other cases are now also in the pipeline after notices were issued to some of those companies that have continued to argue their particular scheme should qualify for NIC relief. The first is expected to beheard in the courts in November.

Peter Moroz, also a managing partner at Innovation Professional Services, said: “Companies have little to lose and everything to gain by either submitting protective claims or holding on to the claims they already have in place. We even know individual drivers who have submitted their own claims.”

Judge Bowler said “there are numerous boundaries and distinctions in the income tax legislation and in particular, in the treatment of pay and benefits provided to employees”.

“Simply because a particular result can be achieved in one way does not mean that the provision of something economically similar in many respects results in even the same income tax treatment,” she added.

Messore said: “Broadly speaking, this translates to if you make subtle changes to how you pay people for their mileage, it can have a profound impact on the tax treatment, but we should not assume that you will get the same outcome for NIC.”

It heaps further uncertainty on future NIC relief against business mileage and employers with similar claims will hope for some clarity when the next case is heard later in the year.