Arrange your work travel carefully

I know most of you don’t love tax, but I genuinely do.

So I do a lot of reading and occasionally I come across a tax case which should put you all on red alert.

And that’s what happened recently.

Because a taxpayer got a bit of a shock when he found that HMRC weren’t going to allow what he thought were perfectly legitimate business expenses.

So what happened?

Well, Mr White was a self-employed flying instructor (now that’s a job I’d love) and he gave lessons from airports in Bournemouth and Shoreham.

But his ‘office’ was at home. I guess that’s reasonable as it’s difficult to do your paperwork with your head in the clouds!

However Mr White didn’t have a dedicated office or a business telephone line – he simply worked on his laptop at home.

Now Mr White claimed the travel costs for his journeys between home and the two airports as well as his telephone expenses.

He had a bit of a nasty surprise when HMRC disallowed his travel costs in full.

And as a side issue, they also reduced his telephone expenses as they didn’t believe Mr White had produced enough evidence to support his claim.

Mr White felt strongly that he was in the right and so he appealed against HMRC’s decision and asked for his case to be heard before a tax tribunal.

The whole case rested on whether the travel expenditure had been incurred “wholly and exclusively for the purposes of the trade” (you may remember this phrase from one of our previous broadcasts).

HMRC had already won another case involving a doctors travelling expenses. The upshot of this tribunal was that travel expenses between home (even where it is used as a place of business) and places of businesses are not tax deductible.

So what happened in Mr White’s case?

Well the judge agreed with HMRC. Basically he said that not only was Mr White’s home his place of business, but the two airports were also his place of business as he attended each “regularly and predictably” to carry out lessons.

So Mr White lucked out and lost his claim. HMRC – 1, Taxpayer – 0.

To add insult to injury HMRC also disallowed Mr White’s telephone expenses. Now that wasn’t much of a shocker considering Mr White was unable to provide a record of business use of his telephone or any other further evidence! And it’s one of the things we remind our clients about regularly – if you’re using personal expenditure for your business, make sure you can support your claim!

It just go to show that nothing is certain in tax these days and given their success so far business travel expenses are likely to come under increased scrutiny from HMRC. So make sure you consider these (and any home office claims) very carefully in future to avoid a challenge from the taxman!

If you have any queries on this or would like help or advice on any other tax matters, please contact our Chief Friendly Tax Adviser [email protected] to ensure you avoid any unexpected (and expensive) tax bills!