Oh Doctor, Doctor…

One of the main reasons workers want to be treated as self-employed rather than as employees is that they can often claim more expenses as a tax deduction. A series of recent cases has thrown previous certainties about the deductibility of travel expenses into confusion, with the surprising result that it might be easier to claim them as the employee-director of a one-person company than as a self-employed business owner. Although the cases almost all concern doctors, the implications are much wider, and may well impact the deductibility of travel expenses by landlords visiting their properties.

The starting point for deducting business expenses is, as always, that they must be ‘wholly and exclusively for business purposes’. Travel from home to the place from which you run your business is not deductible, but if your business is based at your home then, in the past, it has generally been possible to claim travelling expenses for all purely business-related travel.

The two cases that have marked the dividing line for decades are Newsom v Robertson, CA 1952, 33 TC 452, and Horton v Young, CA 1971, 47 TC 60. Mr Newsom was a barrister, with chambers in London and a home in Whipsnade. He said he could claim the costs of travelling between the two because he worked at home as well as at chambers. The Court of Appeal disagreed, saying that his business was based at his chambers and that travel there from his home was a private expense – it arose from his choice of a home some distance from his workplace. By contrast, Mr Horton was a self-employed bricklayer who did all his paperwork at home. This, the Court of Appeal said, was his business base, and therefore the travel to the building sites he worked on was allowable. 

The three new cases about doctors all share certain characteristics. The doctors said they used their homes as a base for their private practices, and it was accepted by the courts that it was a ‘place of business’. However, none of them saw patients there; they saw them at hospitals to which both they and their patients travelled. It was the expense of traveling from their home office to the hospitals that was the subject of the cases.

The first case was Samadian v HMRC [2014] UKUT 0013, which is also the only case that has been heard by the Upper Tribunal. Dr Samadian was a gerontologist who regularly saw patients at two private hospitals near to his home. Consulting rooms were hired for each session; a card with his name on would be fastened to the door each session, with other doctors using the rooms for the rest of the time. 

The First-tier Tribunal found, and the Upper Tribunal agreed, that the two hospitals were further places of business for Dr Samadian. They distinguished Horton v Young because he did not have a place of business at the sites where he worked, only at his home. Looking at the case from first principles, the tribunals held that Dr Samadian inevitably had a mixed motive for his journeys that started or ended at his home. Although they were also to or from a place where he carried on his business, and normally travel between one business location and another is allowable, ‘[p]art of his object in making those journeys [between home and hospitals] must, inescapably in our view, be in order to maintain a private place of residence which is geographically separate from the two hospitals’.

There was still some hope that this would only apply when there was a clear and regular pattern of attendance at, and direct connection with, the hospitals concerned. That hope vanished with the case of Jones v HMRC [2015] UKFTT 477 (TC). Dr Jones also mostly practised at two hospitals in Gwent, both about 20 miles from his home. However, Dr Jones was an anaesthetist, so only attended for operations. He was not booked by the hospitals; he was booked by the surgeon carrying out the operation. As a result, he had no direct connection with the hospitals at all, and also no fixed days when he worked. 

The First-tier Tribunal still found that he had ‘a pattern of regular and predictable attendance to carry out significant professional functions as more than just a visitor’ at the two hospitals. This was based on the equivalent of 50 round trips to one hospital and 100 to the other.

The latest case is Jain v HMRC [2015] UKFTT 0670 (TC). Dr Jain also had a private practice where he regularly attended hotels in Margate, but he made no claim for this travel from his home in nearby Broadstairs. The case concerned the provision of medical reports for litigation purposes under contract for various agencies. 

Dr Jain saw clients for an initial consultation before preparing the reports. The consultations were carried out at two hospitals: The Spire in Washington, Tyne & Wear and the BMI Manor in Bedford. Dr Jain visited 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 stayed overnight at local hotels in both cases. He then prepared the reports at his home in Broadstairs, which is where the bulk of the work was done. Although the tribunal clearly thought the arguments finely balanced, it found that the travel expenses had a duality of purpose, because the hospitals at Bedford and Washington were places of business for Dr Jain, and the travel consequently had a dual purpose, as in Samadian and David Jones. As a result, he also could not claim the hotel expenses.

There has also been one case, White v HMRC [2014] UKFTT 214 (TC), which did not concern a doctor. Mr White was a flying instructor, and the case concerned travel from his home to the airfields from which he operated. This was disallowed by the tribunal, on the same basis that home to work travel has a duality of purpose. 

So far, therefore, the cases have all involved travel to ‘places of business’ that are not the clients’ own premises – the patients, the surgeons engaging Dr Jones, and Mr White’s flying students all had to travel to the location as well. If, however, a tribunal were to hold that a client’s premises could also be the supplier’s place of business, the judgments would have much wider implications. 

Even on the basis of the existing decisions, it is arguable that the current HMRC guidance allowing landlords to claim travel from their home (if that is also their office) to the let premises may no longer be correct, as the property might well be considered a place of business, particularly if there are multiple tenants in a building where the landlord has responsibility for the common areas. 

Finally, as explained in the opening paragraph, it would arguably have been easier for the taxpayers in these cases to have claimed their expenses if they were shareholder/directors of their own companies. The hospitals would, even in Dr Samadian’s case, probably be seen as temporary workplaces because of the limited amount of time spent there and the specific tasks being carried out.