Meg Saksida explains when a journey can be deductible from income tax and when it cannot.
The issue
When a sole trader or a partner wishes to claim business expenses, they need to make sure they are “wholly and exclusively” incurred for the purpose of the business. Travel expenses are particularly problematic as quite often we will have a joint purpose for the journey, known in tax language as a ‘duality of purpose’. Alternatively, having started from home, the journey could be inferred to be normal commuting which is usually not allowable for tax purposes.
Normal commuting
In order to be a qualifying journey, the whole journey or an identifiable part of it must be wholly and exclusively for the business. The process of getting to one’s place of work is not deemed to be made in the course of the business but made in order to put the taxpayer in a position to commence working on the business. It has also been argued that the travel expenses solely allow the taxpayer to live in a separate place to that where they work. A barrister who lived outside of the city in which he worked but travelled each day to his office there had his journeys held as ordinary commuting and not allowable to be deductible for income as long ago as 1952. A similar decision was made in 2010, where a market trader who commuted to where the market was being held was held to be trading at the market, and the journey from home to the marketplace was not wholly and exclusively for the business.
The home as a place of trade
However, it can be the case that the place of trade is the home, and if it is, then a deduction is allowed for wholly and exclusively incurred travel departing from the home. One of the key cases in this area surrounded a bricklayer, who kept all his tools, implements and work-related papers at home but worked at different sites in the surrounding area. Not only was the taxpayer allowed the travelling expenses between the sites on which he worked, but the Court of Appeal found he was also allowed to deduct his journeys from home to the sites. The judge stated:
“... where a person has no fixed place …at which he carries on his trade or profession … being in that sense of an itinerant nature, the travelling expenses of that person between his home and the places where from time to time he happens to be… will normally be… wholly and exclusively… for the purpose of that trade or profession”.
The judge did qualify this by stating that “will normally be” indicates that each case will depend on its own facts.
It was later further explained that if a barrister, such as in the 1952 case above, had been seldom in the city chambers but mostly working from home, this barrister, too, would have been able to deduct his travel expenses between home and the various courts.
Several bases for a trade
In the case of Samadian v R&C Commrs [2014] BTC 504, a doctor, who in addition to working for the NHS also had private patients at both their homes and in private hospitals, had several bases for his trade. In this case, it was held that where his work was of an itinerant nature (such as visiting private patients), his journeys were deductible even if departing from home. His journeys between hospital and hospital were also deductible. However, the journeys from home (or any other place which was not one of his trade bases) to the hospitals were not deductible.
Practical tip
Generally, home to office commuting is not allowable. If the trade base is at home, however, and the profession is of an itinerant nature, depending on the facts, motor expenses and other travel expenses should be allowable.
