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HMRC internal manual

National Insurance Manual

NIM02191 - Class 1 NICs : Earnings of employees and office holders : Goods and/or services purchased by directors and other employees : Background - The 'Overdrive' case

The ‘Overdrive’ case focused attention on the fact that company directors and certain authorised employees can enter into contracts to purchase goods and/or services on behalf of their companies.

In the ‘Overdrive’ case, it was established that for NIC purposes there should be no difference in the treatment of fuel obtained by way of:

  • employers’ credit/fuel agency cards
  • employers’ garage accounts, and
  • vouchers redeemable only for fuel and lubricants.

Moreover, the case established beyond doubt that, excluding any petrol identified as being used solely for business purposes, NICs were due in respect of any fuel purchased by any one of the above methods.

The reason for this is that at the point of transferring petrol from the pump into the tank of the car, the employee is effectively entering into a contract with the garage to purchase the petrol and to pay for it. The employee may at that stage substitute their employer’s liability for their own by offering payment via one of the options mentioned above.

While the case established the general rule that liability for NICs arises, it also highlighted the fact that liability did not arise if it was explained in advance and it was accepted that the purchase was being made on behalf of the company.

Under this arrangement, the employee must tell the garage that they will be making the purchase as agent for their employer before they enter into the contract to buy the petrol, and the garage must accept that they are acting as their employer’s agent. This was commonly known as “using the litany”. The establishment of this ‘agency’ is sufficient to render the employer liable to pay for the petrol bought.

The ‘Overdrive’ case centred primarily on fuel purchased by way of employers’ credit cards and fuel agency cards. However, the establishment of this ‘agency’ cannot be confined to purchases of fuel, nor to purchases made by means of credit/agency cards.