Rules tighten on travel and subsistence

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 TC04788: Dr Sharat Jain December 2015 First-tier Tribunal – more travel problems


In addition to being employed by the NHS and carrying out private medical work, the taxpayer undertook work providing medical reports for litigation purposes for a number of agencies. HMRC opened an enquiry into his tax return for 2010/11 in October 2012. The taxpayer deducted various travel and subsistence expenses in calculating his taxable earnings, which HMRC deemed not to be allowable expenses.


As part of the business, the taxpayer sees clients for an initial consultation before preparing the reports. The taxpayer lives in Kent. The consultations are carried out at two hospitals, The Spire in Washington, Tyne & Wear and The BMI Manor in Bedford. The taxpayer visits each hospital once a month, seeing clients during one day at The Spire and over two days at The BMI Manor on each visit. He stays overnight at local hotels in both cases.


The taxpayer prepares the reports at his home. Each report takes between two and three hours to prepare and additional administration is also carried out at home but the taxpayer has two secretaries, not at his home, to help him.


The agency contracts provide for set fees and stipulate payment dates ranging from 180 to 270 days after the work has been carried out. Payment may be withheld if the report is not prepared to the required standard but does not depend on the outcome of the litigation.


HMRC argued that the costs of travel and subsistence from the tax payers home to Washington and Bedford were not allowed.


The Tribunal referred to two historical cases on the wholly and exclusively test. The first was Newsom v Robertson (H M Inspector of Taxes) 1952 33 TC 452, where a barrister claimed the costs of travel between home and chambers on the basis that his home was his place of business. The Court of Appeal found that the travel between the barrister’s chambers and home had a dual purpose, to carry out further work but also to ‘eat, sleep and pursue domestic avocations’. The second was Horton v Young [1971] 3 All ER 412, the only reported case in which travel to and from the taxpayer’s home has been found to satisfy the statutory test and be deductible. In this case, Mr Horton was a bricklayer who worked on various building sites depending on the particular contracts he entered into from time to time. On the facts, his business base was found to be his home, there being no other place that could properly be called his place of business. His work was itinerant and it was found that all journeys he made from his home to various building sites were wholly and exclusively for the purpose of carrying on his trade.


Following on from this argument, logically under S34 ITTOIA 2005, the subsistence costs at each location could not be allowable either.


S34 ITTOIA 2005 applies to subsistence:


1. In calculating the profits of a trade, a deduction is allowed for any reasonable expenses incurred on food or drink for consumption by the trader at a place to which the trader travels in the course of carrying trade, or while travelling to a place in the course of carrying on the trade, if conditions A and B are met.


2. Condition A is met if


(a) a deduction is allowed for the expenses incurred by the trader in travelling to the place, or


(b) where the expenses of travelling to the place are not incurred by the trader, a deduction would be allowed for the if they were.


3. Condition B is met if


(a) at the time the expenses are incurred on the food or drink, the trade is by its nature itinerant, or


(b) the trader does not travel to the place more than occasionally in the course of carrying on the trade and either


(i) the travel in connection with which the expenses are incurred on the food or drink is undertaken otherwise than as part of the trader’s normal pattern or travel in the course of carrying on the trade, or


(ii) the trader does not have such a normal pattern of travel


HMRC argued that The Spire and The BMI Manor were the taxpayer’s ‘places of business’ and so, following the principles in the recent Samadian case, his travel expenses from home to them were not deductible.


The Tribunal stated:


‘We find that Dr Jain’s home was a place of business for the purposes for the medical report business and that his carried out the bulk of the work here. However, that does not mean that The Spire and The BMI Manor could not also be places of business. Whether they are is a question of fact. There is no statutory definition of ‘place of business’. In Dr Jain’s case there is a degree of predictability and regularity in his visits to The Spire and The BMI Manor. We accept that he does not have to see the patients in there (or any) hospitals, but it is not the nature of the facilities he uses but the regularity of his visits that indicate whether a particular location is a place of business.


Dr Jain’s visits to these hospitals are for a different purpose and less frequent than those in the Samadian case. In addition, the work he does at home after the on site visits seem to be more extensive than in the Samadian case. Notwithstanding this, we are mindful of the Upper Tribunal’s comments on the desirability, in the interests of the rule of law, that like cases be treated alike. Here, we find sufficient similarity in the regularity and predictability of Dr Jain’s visits to The Spire and The BMI Manor as to make them places of business.


…it follows that costs of travel between them and his home (even though it is also a place of business) are not incurred wholly and exclusively for the purposes of the business…


As a result, the subsistence costs are not deductible either, since they cannot be said to be incurred wholly and exclusively for the purpose of the business, having the dual purpose of providing nourishment.’


The appeal was dismissed.

The Jain case and the Samadian case show that it is getting increasingly difficult to claim for travel and subsistence expenses.

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