Argument for Business Base

Re:Argument for Business Base

I have looked at this in some detail. I was going to suggest earlier recommending you argue your case with HMRC in terms of the expenses being wholly, exclusively and necessarily incurred. However, in light of BIM37635 and 37620 it did suggest to me that this wasn't a black and white argument. However, it is looking good for your client.

There are two cases which may be appropriate to your client. I think the latter may be more appropriate.

BIM37365 concerns a milkman who chose to live away from his round. In the BIM HMRC say that the costs of travel to and from home and a place of work are not allowable where one of the purposes of travel is to allow the trader to live away from their place of work. It follows a case (Powell v Jackman (2004)) where the test for wholly, exclusively and necessarily failed the statutory test in ICTA 1988 S74 1(a). Effectively what they are saying is that the site at which business records, tools, etc are kept and maintained does not automatically become the base of your clients operation. You need to establish the nature of your clients trade i.e. carpenter/builder and what purpose the journeys serve. If one of the purposes of the journey is to allow your client is to live away from the place of work then there could be duality of purpose and no deduction would be allowed. This happened because of the milkman's actual trade (i.e. a milkround).

BIM37620 considers Horton v Young. Horton carried on business as a bricklayer he:

- entered into contracts within 55 miles from his home
- worked on each site for 3 weeks or so
- had no office on the site
- contracted for work, wrote up his books etc at home
- travelled from sites in his car in which he conveyed other members of his bricklaying tem

He claimed (as a deduction) 1/3 travel from between sites and the rest to and from his home. Horton contended that his home was his office base but the SpC held that the expenses were not incurred wholly, exclusively and necessarily for his trade.

HMRC held that the deductions were not allowable. I suspect therefore that your Inspector is basing his decision on Horton v Young BEFORE it went to the Court of Appeal.

The courts overruled this decision as the bricklayer was classed as an "itinerant trader" i.e. someone who travels from their home to different sites on a temporary basis to do their work. Where an "itinerant" trader's base of operations is their home, you should allow the travelling costs between the residence and the sites at which they work.

I have referenced both these BIM's to illustrate that the milkman couldn't deduct his travel because essentially he had a milkround which would have incurred the same nature of travel on a daily basis despite him contending his home was his base. The bricklayer's case is different because all visits are "temporary" and I suspect this will apply to your carpenter/general builder client.

As BIM37620 is more appropriate it can be found here:

http://www.hmrc.gov.uk/manuals/bimmanual/BIM37620.htm

I think you should be able to get your travelling costs allowed if you cite this.

Kind regards
Steve

Re:Argument for Business Base

Wow Steve..

I guess things are busy in the office at the moment!!