In Noel White v The Commissioners for Her Majesty"s Revenue & Customs TC 03354 UKFTT 214 (TC), the FTT dismissed the taxpayer’s appeal against HMRC’s decision to disallow his travel costs from his home, where he operated his business, and the airports from which he gave flying lessons and examined pilots, on the basis that the costs were not incurred wholly and exclusively for the purposes of his business say Harris & Co accountants Northampton
The taxpayer (Mr White) is a self-employed senior flying instructor and examiner. He operates his business from home and gives flying lessons and examines pilots at two airports. He does not have a dedicated office at home or a separate business telephone line, but uses a laptop in any one of a number of rooms in his house and the Civil Aviation Authority (CAA) uses his home details to make contact.
Although White can teach at numerous airports, but invariably he just uses two airports. He meets students at the relevant airport and then performs any debrief at the airport, but if he examines a pilot he completes the report to the CAA at home.
His 2006–07 tax return included a claim for the travel costs incurred driving between his home and the airports, and certain home telephone costs.
HMRC disallowed the travel expenses, concluding that White’s place of work was the airports and therefore the costs of travelling between home and these places of work were not allowed on the ground that they were not incurred wholly and exclusively for the purposes of his business.
HMRC decided that as Mr White made 48 flights in the year it would be reasonable to claim for 100 calls (being 50 calls to the airport and 50 calls to students) at an estimated £1 per call and therefore restricted the telephone costs to £100. The taxman subsequently issued discovery assessments for other years estimating the disallowances for travel and telephone expenses based on the findings for 2006–07 and working back using the retail price index.
White appealed against the disallowance of his travel expenses, the partial disallowance of his telephone expenses and also submitted that HMRC were not entitled to raise discovery assessments because a discovery must be of a finite amount.
In relation to the travel expenses, the FTT referred to the various decisions relating to business travel expenses, including the recent Upper Tribunal decision of Samadian  UKUT 0013 and also referred toMallalieu v Drummond  BTC 380 on the wider issue of ‘wholly and exclusively’ .
The Tribunal decided that Mr White’s situation was much closer to that of Dr Samadian (who was not allowed to deduct the travel expenses he incurred between his office at home and the private hospitals he visited) than to Mr Horton (in Horton v Young (1971) 47 TC 60). It reached the decision to disallow White’s travel expenses on the basis of the statutory test, finding that the travel expenses for journeys between his home and the airports ‘were not incurred wholly and exclusively for the purposes of his profession as a flying instructor and examiner but also as a result of his decision to live away from the airports where he carried on his business’ .
The Tribunal also ruled that the discovery assessments were properly made as there was nothing in or with Mr White’s tax return to alert HMRC to the nature of the expenses claimed and therefore HMRC only became aware of these when enquiries were made into White’s 2006–07 tax return. The appeal was therefore dismissed.
Meg Wilson, tax expert at CCH, said: ‘This is the first case we have seen regarding business travel expenses since the Upper Tribunal decision in Samadianearlier this year and in fact the decision in this case was delayed pending the result of the Samadian case.
‘Following the result in the Samadian case and given the regular and predictable nature of the taxpayer’s visits to the airports, it is not surprising that the tribunal ruled in favour of HMRC with regard to the travel expenses.
‘As an aside, during the appeal the taxpayer’s representative submitted that the burden of proof in the appeal was on HMRC. The tribunal disagreed, finding that it has been settled law for almost 90 years that the burden is on the taxpayer, as the person asserting that he has been overcharged by an assessment, to show that the sums charged are excessive.’