Following hot on the heels of the Dr Samadian case, which we reported in our blog 'Dr No! - NHS Consultants', there has been another case on travelling expenses for the self-employed. Before considering the second case, a short recap of Dr Samadian is probably worthwhile.
After an enquiry lasting around seven years and four Tribunal hearings, the Upper Tribunal disallowed the travelling expenses of an NHS consultant doing private work.
The taxpayer specialises in the health care of elderly people and works full time for the Epsom and St Helier NHS Trust, as an employee, at two hospitals in south London and has a permanent NHS office, including a secretary.
The taxpayer holds weekly out-patient sessions at two private hospitals, St Anthony's in Cheam and Parkside in Wimbledon, and his NHS secretary acts as his secretary in his private practice in her spare time.
Typically, referral letters are sent to the taxpayer's office at his home in Sutton, directly or via his NHS office. Headed paper shows his home as the correspondence address, as well as paperwork sent to him by health insurance companies. Telephone calls are made to his home/office, mobile, private secretary or NHS office, while emails are usually sent to his professional email address which he accesses at home. After receiving a referral, the taxpayer embarks on a fact-finding consultation at one of the sessions at St Anthony's or Parkside, at the patient's home or at an alternative care location. Out-patient consulting rooms are hired for three hours, with other doctors using the rooms on a similarly restricted basis for the rest of the time. At the end of each session, the temporary doctor's name plate is changed on the door. Any test results or other correspondence at either of the private hospitals is placed in a shared pigeon hole. The taxpayer prepares a treatment plan in his home/office and continues to monitor and care for the patient. He reviews patients' conditions during his ward rounds, six evenings a week, at St Anthony's.
The taxpayer's home office contains a desk, chair, medical library, computer, filing cabinet, prescription pads, basic medical equipment, patient clinical records and his own business records. The taxpayer does not examine patients at home.
The Upper Tribunal upheld the decision that:
- the taxpayer had places of business at Parkside, St Antony's and his home;
- as the taxpayer had other places of business apart from his home, his travel between home and those other places of business was not allowable;
- although the taxpayer's travel between his home and Parkside/St Antony's was between places of business, on general principles no deduction could be allowed in relation to that travel;
- the taxpayer's travel between his places of employment with the NHS and Parkside/St Antony's on the other was undertaken to get him to and from his place of business and not in the course of carrying on his business.
Up, up and away
The more recent case involved a self-employed flying instructor and examiner and gave lessons and conducted examinations at two airports. The taxpayer claimed the cost of travel by car between his home and the airports in his return for 2006/07. HMRC decided that the taxpayer was not entitled to deduct his travel expenses as they were not wholly and exclusively incurred for the purposes of his business.
HMRC issued discovery assessments and a closure notice for 2003/04 to 2006/07 and 2008/09 totalling £9,434.79.
The taxpayer keeps his business records, as well as equipment such as charts and navigation equipment, at his home but does not have an office in his home. He uses a laptop for business purposes and might use it in any one of a numbers of rooms in his house.
The taxpayer's home address is that at which he is registered with the Civil Aviation Authority (CAA), which contacts him at that address. The taxpayer reads any new CAA materials in order to stay up to date as an examiner at home. His home telephone number is on the CAA website and people can contact him as a result of that but most of his work comes from recommendations by word of mouth.
Once again, the Tribunal's rationale was based on two historic cases, Newsom v Robertson and Horton v Young.
Newsom revolved around a barrister who worked in his chambers but also at home and claimed the costs of travelling between the two. The Court held that there was a dual purpose and the costs were not allowable. Horton involved a self-employed bricklayer who was the leader of a bricklaying team of three men. Mr Horton had no business premises. He wrote up his books and kept his tools at home and, during the relevant period, worked for a single main contractor. During the year in question, Mr Horton worked at seven different sites, between 5 and 55 miles from his home, and claimed the costs as allowable.
The Court held that these costs were allowable:
'In my view, where a person has no fixed place or places at which he carries on his trade or profession but moves continually from one place to another, at each of which he consecutively exercises his trade or profession on a purely temporary basis and then departs, 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 exercising his trade or profession will normally be, and are in the case before me, wholly and exclusively laid out or expended for the purposes of that trade or profession.'
So how does this apply to flying instructors?
The Tribunal stated:
'(The taxpayer) contended that the two airports were not Mr White's places of business but, as in Horton, places at which he exercised his trade or profession from time to time. We disagree. We consider that Mr White also had places of business at the two airports where he met his students, taught them to fly and sometimes examined them or qualified pilots. Mr White worked almost exclusively at Bournemouth and Shoreham airports.
We conclude that the travel expenses claimed by Mr White in respect of the journeys between his home and the airports were not incurred wholly and exclusively for the purposes of his profession as a flying instructor and examiner but also as a result of his decision to live away from the airports at Bournemouth and Shoreham where he carried on his business.'
The appeal was dismissed.
Another case ion the pipeline
The case of Tim Healy, the actor, is wending its way through the tribunal system. The case relates to expenses claimed for accommodation of £32,503, subsistence of £4,094 and taxi fares of £4,080, which the taxpayer included in his 2005/06 return.
Mr Healy lived in Cheshire since and, in December 2004, agreed to appear in Billy Elliot and rehearsals took place in London between December 2004 and March 2005, during which time he stayed at a friend's apartment.
In April 2005 Mr Healy leased a flat in London which is just over one mile from the Victoria Palace Theatre and he claimed the rental costs of this during the period he appeared in the show from April to December 2005.
Mr Healy has again argued that he was an itinerant worker throughout the whole period when he was in London, as he was working in a variety of venues throughout out the year, even when Billy Elliot was on. We shall see....
So where does this leave the self-employed?
A number of things are clear from these cases:
- HMRC are actively targeting this issue - this is not just an issue for NHS consultants but any self-employed person who 'works from home'.
- The historic cases set a high bar that some clients will not pass.
- The 'pain' of HMRC's adjustments may spiral backwards over several years due to the changes in case law on discovery.
So the moral appears to be to have a close look at clients' travel and subsistence claims in light of these recent cases and, perhaps, moderate claims going forward.
(The views expressed in this blog are entirely his own.)