As a general rule, the travel expenses of a self-employed individual from home to a workplace is not allowable under the ‘wholly and exclusively’ rule (in ITTOIA 2005, s 34(1)). However, if the individual’s trade is exercised from home, a deduction is potentially available (see Horton v Young  47 TC 60).
However, HMRC does not appear to favour the decision in Horton v Young, and may be inclined to argue that the circumstances of other taxpayers are not sufficiently ‘on all fours’ with that case. For example, the taxpayer (a self-employed milkman) was subsequently unsuccessful in claiming a deduction for travel expenses between home and a milk depot in Jackman v Powell  STC 645. In addition, HMRC prefer to cite Newsome v Robertson (Inspector of Taxes)  2 All ER 728 (a case concerning a barrister’s travel costs) when challenging travel expense claims from home to a place of work.
Work base at home?
However, more recently in Mellor v CRC  UKFTT 29 (TC), the taxpayer fared rather better. In that case, Mr Mellor was a self-employed electrician who worked on sites at varying distances from his home in Ruislip. He claimed motor expenses for the journeys, on the basis that his home was the base for his work.
HMRC denied the motor expenses claim on the basis that Mr Mellor did not exercise his trade as an electrician from home, and therefore his journeys from home to various sites were not incurred wholly and exclusively for the purposes of the trade. The taxpayer appealed.
The taxpayer’s representative submitted that Mr Mellor’s home was the base of his operations, i.e. where he prepared quotes, telephoned many contractors, and kept his tools and equipment. It was also argued that the circumstances fell within the parameters of Horton v Young. HMRC contended the use of Mr Mellor’s home as described did not make it an office, and that the facts of the case were different from those in Horton v Young. HMRC relied on the case Newsome v Robertson in support of the motor expenses being disallowable. The tribunal considered both cases in some depth.
Location of base
The tribunal concluded that a sub-contractor such as Mr Mellor must have a business base, so the question arose as to the location of that base. The tribunal did not consider the various sites where Mr Mellor worked to be his base. It was difficult to see how the taxpayer could have co-ordinated his business without having somewhere to receive electrical drawings to allow him to make quotes.
The tribunal also stated that it would be ‘unsatisfactory’ if Mr Mellor had nowhere to prepare the quotes, and he prepared his quotes from home. He was also bound to keep his tools somewhere each evening, and he kept them from home. What business records existed were also kept at home.
HMRC had accepted that Mr Mellor may well have examined plans and drawn up quotes when he returned home, but considered that his self-employment had finished by that time. However, the tribunal decided that this could not be correct, as such work was an integral part of his trading activity.
Having concluded that the base for Mr Mellor’s trade was his home, the tribunal held that a deduction could be claimed for the costs of travel from Mr Mellor’s home to work sites. However, the tribunal emphasised that it is for the taxpayer to show what expenses were incurred wholly and exclusively for the trade. The tribunal noted the lack of reliable evidence of travel actually undertaken, but perhaps fortunately for Mr Mellor the tribunal had not been asked to decide whether the actual costs claimed were deductible.
This is an important point. It is not sufficient to consider whether home to work travel is deductible; there needs to be reliable records of the travel undertaken and the costs incurred.
Further taxpayer ‘wins’
The taxpayer was also successful in Reed v Customs  UKFTT 92 (TC). In that case, a self-employed scaffolder incurred travel expenses from his home in Grimsby to rented accommodation in Birmingham, in addition to rental costs for the accommodation itself. HMRC disallowed the expenses claims, and the taxpayer appealed. He argued that home was his work base. HMRC contended that Mr Reed’s business was based in Birmingham during the period that he worked there. However, the tribunal held that Mr Reed had been an itinerant worker, and that his home or base of operations was Grimsby. Accordingly, the taxpayer’s travel expenses were allowable.
Mr Reed’s accommodation costs were also allowable, with the tribunal commenting: “It was a necessary and praise-worthy expedient to reduce the expenses incurred wholly and necessarily for his business to live in rented accommodation rather than to incur the greater expense of hotel accommodation.”
In Kenyon v Revenue & Customs  UKFTT 91 (TC), the taxpayer was a self-employed pipe fitter. He appealed against HMRC’s refusal to allow travel and subsistence expenses for his return journeys from the Wirral to London. HMRC argued that Mr Kenyon’s base of operations was Greenwich where the work was carried out, that travel from home to Greenwich was merely commuting to work, and that his trading activities did not start until he arrived on the site. However, the tribunal allowed the taxpayer’s appeal, although it also commented: “These cases are invariably fact sensitive”.
The tribunal observed that Mr Kenyon had worked at various sites during the period under review. He organised new work from home, and held there was no doubt that Mr Kenyon’s home was his workbase. His travel expenses were allowable, although accommodation expenses also claimed were held not to be allowable.
HMRC will no doubt point out that each case is subject to its own particular facts. However, there appears to be some similarity in the above three cases, which may be of assistance to those self-employed individuals who work at various sites. Of course, the more evidence which exists to support the argument that home is the taxpayer’s base of business operations, the better.
The above article is reproduced from ‘Practice Update’ (March/April), a tax Newsletter produced by Mark McLaughlin Associates Ltd. To download current and past editions of Practice Update, see the Newsletters section.