Following the decision of the First-tier Tribunal which found in favour of the taxpayer, HMRC has now been granted permission to appeal the decision to the Upper Tribunal and are now proceeding with that appeal.

In the case, the First-tier Tribunal found in favour of the appellant, Total People Ltd, allowing that the lump sum payments made by the company were payments of motoring expenditure. HMRC had argued that there was no clear link between the payments made and the actual use of the vehicle by the individual employees, therefore the payments were effectively additional salary and liable in full to Class 1 National Insurance Contributions.

The taxpayer argued that as the payments were made to employees in recognition of the fact that their job required them to use their car for business, they must be payments of ‘Relevant Motoring Expenditure’ (RME).

HMRC are stressing that the decision of the First-tier Tribunal does not form a legal precedent, and that as they are appealing the decision, the basic position remains unchanged. Their view is that in order for a payment to be accepted as a payment of RME within the meaning of the legislation, there must be a clear link between the payment made and the actual use of the vehicle.

HMRC's view is that this has not changed as a result of the decision in this case and therefore any other claims for refunds will continue to be judged on their own facts and merits in line with this position.

The full text of the case can be accessed at http://www.bailii.org/uk/cases/UKFTT/TC/2010/TC00661.html