If you are self-employed and work from your home, you may feel safe in the belief that the costs you incur in travelling to other places of business are tax deductible. But watch out – life may not be quite so straightforward!
One particular taxpayer, Dr Samadian, was employed full-time as a geriatrician at two NHS hospitals that provided him with an office and a secretary. He was also in private practice, seeing patients in hired consulting rooms at two private hospitals. He had a home-based office where he carried out essential work, but saw no patients there.
He took the view that his self-employed business was based at his home. He used his car to travel between his home base and his various places of work, and claimed capital allowances and motoring costs on the basis that 65% of his total mileage related to business. HM Revenue & Customs (HMRC) took issue with this and wanted to reduce the deductible amount to 6%.
Wholly and exclusively
HMRC argued that the miles driven by Dr Samadian between his home and the private hospitals, and between the NHS and private hospitals, were not ‘wholly and exclusively’ for business purposes so the costs were not tax deductible. They contended that those journeys were undertaken partly to take the taxpayer to fixed places where he delivered his medical expertise in a habitual manner.
The dispute went before the First Tier Tax Tribunal, which ruled in favour of HMRC. The Tribunal held that neither the journeys between home and the private hospitals nor those between the NHS and private hospitals were allowable because the travel was not an integral part of the business itself.
At the time of writing, it is unclear whether or not Dr Samadian will appeal against the Tribunal’s ruling. Whatever the eventual outcome for him, the case can be expected to encourage HMRC to scrutinise travel expenses claims more closely, and this could have far-reaching implications for self-employed taxpayers based at home who travel to ‘habitual’ workplaces.
Earlier court decisions had already created precedents on which HMRC rely. Over the years a barrister, a dentist and a milkman have all tried, and failed, to establish that their businesses were based at home. They were denied tax relief on travel from home to other places of business. Exceptionally, a bricklayer who accepted instructions at home and had no other fixed place of business was able to claim tax relief on travelling to temporary building sites.
Practical Tip :
If you are self-employed and travel from home to a variety of different workplaces, you won’t be able to self-assess accurately without determining which travel must be treated as private ‘home to business’ and which can be claimed as wholly and exclusively for business purposes. If the workplaces are all genuinely temporary, you may be able to regard travel to them as business travel. If they are habitual workplaces, most of your travel may be non-business. If you are in doubt about this fine distinction, it might be prudent to seek professional advice.
Donald Drysdale
