A recent test case was heard by the tax tribunal regarding whether certain business travel expenses were allowable, in terms of the interpretation of the “wholly and exclusively” rules.
Dr Samadian worked full time as an employee for the NHS at two hospitals in London and had a permanent NHS office. He also worked at two private hospitals holding weekly out-patient sessions.
The tribunal acknowledged that Dr Samadian had a dedicated office in his home which was necessary for his professional activity; however the Tribunal did not accept that Dr Samadian’s home office could be treated as the start for calculating his allowable private practice business mileage for habitual journeys.
The decision could potentially have an impact on all self-employed professions in cases where there is a home office and another business base from which they operate on a regular basis.
The taxpayer argued that the business base should be regarded as the place from which the business is run and not the place where the professional services are carried out (as was argued by HMRC).
In particular the taxpayer said there was no general principle that meant any travel to/from a taxpayer’s home must always be disallowable due to having an element of non-business duality. He said that each case should be judged on its own facts.
The taxpayer submitted that on the facts, his home was the business base and therefore there was no non-business purpose in his travel between the home and the private hospitals.
HMRC’s argument was that the cost of travelling to and from home and a place of work is generally not allowable as the journeys are not wholly and exclusively for business.
The motive, object and purpose of Dr Samadian’s disputed journeys were to take him from his home, where he lives, and to then undo this journey.
Past Cases Considered
The tribunal considered various cases put forward by the taxpayer and HMRC, however rather unusually they also considered an additional case – Mallalieu v Drummond, with a view to explain the statutory words “expended for the purposes of the trade”.
Mallalieu related to a claim for professional clothing for use in court by a barrister. The tribunal concluded that this claim had failed “because although she had conscious motive for incurring the expenditure which was not a business motive, the facts were such that there must necessarily have been a non-business motive in her mind as well”
The judge felt this case made it clear that it was possible for him to “look behind the conscious motive of a taxpayer where the facts are such that an unconscious object should also be inferred”.
The tribunal accepted that Dr Samadian has a place of business at home, but there must have been a “mixed object” in the travelling between home and the private hospitals, because part of the object of the journeys must “inescapably” be to maintain a home in a separate location.
The journeys between the NHS hospitals and the private hospitals were also regarded as non-deductible by the panel on the grounds that “the object of the travel is to put the appellant into a position where he can carry on his business away from his place of employment; the travel is not an integral part of the business itself”.