Posted by James Pearson on 13 Feb 2013
A recent tax case highlights the complexities of claiming for self-employed business travel.
Self-employed mileage claims operate under the standard principle that expenses are allowed as a deduction against profits to the extent that they are incurred wholly and exclusively for the purpose of the self-employment. Normally this is taken to mean that travel from home to a place of work is not a deductible expense, since that expense was not incurred wholly and exclusively for the purpose of the self-employment but included a private element. This is because the journey was at least partially for the purpose of taking the individual home from the place of work and then undoing that journey.
As always, matters are not that clear-cut and complications arise where an individual primarily operates their self-employment from home. However, a recent case has added some clarity to such situations, and not in the tax payers’ favour.
A recent tax case involves a doctor who is employed by the NHS and also undertakes weekly out-patient sessions at two private hospitals as a self-employed individual. His NHS job provides a fully supported office for his employment duties and his NHS secretary also acts as the secretary for his private work in her spare time. He has a dedicated office at home for his private work. This office is where he carried out business administration, the research and design of treatment plans and the review of tests performed on his patients. Private patients are met either at the patient’s home or other care location or at out-patient consulting rooms in the private hospitals, hired for three hour sessions. The doctor also visits one of the private hospitals six evenings a week to monitor any of his patients who have been admitted. He frequently receives correspondence and ‘phone calls at his home address that relate to his private work.
The doctor’s advisers argued that the business was based at the doctor’s house. This was where administration was based, and where most work other than direct patient contact was carried out. Journeys to the private hospitals were business trips to see patients at transient and limited facilities and therefore should have been a tax deductible expense. This would follow the way subcontractors working at temporary sites could normally claim for travel between their home and those sites.
HMRC did not accept this argument on the grounds that any travel from home or from the NHS job to the private hospitals must by definition have an element of private purpose and therefore the travel expenses were not tax deductible. HMRC also drew a distinction between a subcontractor travelling to numerous, ever-changing temporary work places, and the doctor visiting the same two hospitals on a regular basis. As a result HMRC did not challenge the deductibility of journeys to and from patient’s homes or alternative care locations.
HMRC won the case, despite it being accepted that the doctor, by necessity, had a place of business at home. An appeal could still be made against this decision, but as things stand the availability of mileage claims for self-employed individuals who work from home could be severely curtailed.
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