Samadian v Revenue and Customs Commissioners
| Jurisdiction | UK Non-devolved |
| Judgment Date | 15 January 2014 |
| Neutral Citation | [2014] UKUT 13 (TCC) |
| Date | 15 January 2014 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2014] UKUT 0013 (TCC)
Upper Tribunal (Tax and Chancery Chamber)
Sales J.
Joseph Howard, instructed by Stanbridge Associates Ltd, appeared for the Appellant
Christopher Stone, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the Respondents
Deduction of travel expenses - Medical practitioner in private practice - Travel between office at home and place of business - Travel between other locations and place of business - Whether "wholly and exclusively" for the purposes of a trade or profession - Income and Corporation Taxes Act 1988 ("ICTA 1988"), Income and Corporation Taxes Act 1988 section 74s. 74 - Income Tax (Trading and Other Income) Act 2005 ("ITTOIA 2005"), Income Tax (Trading and Other Income) Act 2005 section 34s. 34.
The Upper Tribunal has upheld a First-tier Tribunal decision on travel expenses in SamadianTAX[2013] TC 02533 ruling that the cost of journeys by a consultant between private clinics and NHS hospitals and between private clinics and his home were not incurred "wholly and exclusively" for the purposes of his private practice and are therefore not deductible expenses.
Dr Samadian is a self-employed consultant who works full time as an NHS employee at two London hospitals and also looks after private patients as a self-employed consultant. He holds weekly out-patient appointments to assess his private patients at two private hospitals and prepares treatment plans for them at his home office, where he also carries out other administrative tasks.
HMRC disallowed the travel costs incurred by Dr Samadian for the journeys between the private clinics and his places of work at the NHS hospitals and between the private clinics and his home, on the basis that the journeys were not undertaken wholly and exclusively for the purposes of Dr Samadian's profession.
Although the First-tier Tribunal (FTT) accepted that Dr Samadian had a place of business at home necessary for his professional practice, they found that because of a "pattern of regular and predictable attendance" at the two private hospitals these were also "places of business" and thus they did not accept that the case was equivalent to Horton v Young (HMIT)TAX(1971) 47 TC 60. Referring to Mallalieu v Drummond (HMIT)TAX[1983] BTC 380 the FTT found that the object of Dr Samadian's travel between the NHS hospitals and private hospitals was so that he could carry on his business away from where he was employed and the travel was thus "not an integral part of the business itself". With regard to the journeys between home and the private hospitals the FTT decided that there must have been a "mixed object" with at least part of the motive being to live away from the hospitals. The First-tier Tribunal therefore disallowed the costs of the journeys between the NHS hospitals and the private hospitals and between his home and the private hospitals.
Dr Samadian appealed to the Upper Tribunal on the grounds that:
(2) The FTT erred in characterising the private hospitals as places of business from which Dr Samadian carried on his profession and in distinguishing Horton on that basis.
(3) The FTT erred in holding that Dr Samadian must have had a mixed object in his general pattern of travelling between his home and his places of business at the private hospitals.
(4) The FTT erred in concluding that the travel between the NHS hospitals and the private hospitals is not deductible.
The Upper Tribunal dismissed all three grounds of appeal, finding the FTT's decision to be essentially correct. In respect of the journeys home from the private hospitals the Tribunal found that Dr Samadian needed "a home in which to live and carry on his private life, and it is an inevitable feature of his journey home in the evening from the private hospitals that part of his purpose was to get there in order to advance those private, non-business interests". In respect of the outward journeys from Dr Samadian's home to the private hospitals they were made partly to enable him to maintain his home where he chose and away from the places where he carries on his business in a fixed and predictable way.
The Upper Tribunal provided a summary of categories for treating travel expenses as deductible or non-deductible which in its view would "attract broad public acceptance":
travel expenses are treated as deductible in relation to itinerant work (such as Dr Samadian's home visits to patients);
travel expenses for journeys between places of business for purely business purposes are treated as deductible;
travel expenses for journeys between home (even where the home is used as a place of business) and places of business are treated as non-deductible (other than in very exceptional circumstances, such as if Dr Samadian is at one of the private hospitals preparing to see a patient, he realises he needs his notes on the patient which are located in his office at home so he makes a special trip to go home to collect the notes, and immediately returns to the hospital to see the patient);
travel expenses for journeys between a location which is not a place of business and a location which is a place of business are not deductible.
This case highlights the difficulties faced by self-employed taxpayers in deciding which travel costs are deductible in computing their profits and which are not. Given the increasing numbers of people working both at home and at other places of work the decision is bad news for many taxpayers.
We know from the Office of Tax Simplification's Review of employee benefits and expenses: interim report published in August 2013 that they are looking at changes to the travel and subsistence expense rules for employees because of significant changes to working patterns over the last 15 years. It would also appear to be a good opportunity to look at the rules applying to self-employed workers because they have seen similar changes to working patterns.
[1]This case concerns the question of the extent of the right to deduct travel expenses when computing the profits of a trade or profession on which income tax is payable. It is an appeal from a decision of the First-tier Tribunal (Tax Chamber) (Judge Kevin Poole and Kamal Hossain FCA FCIB) ("the FTT"), SamadianTAX[2013] TC 02533, in which the FTT decided certain issues of principle arising between the taxpayer, Dr Samadian, and the Respondent ("HMRC"). Unless otherwise indicated, references in square brackets are to paragraph numbers in the FTT's decision.
[2]Dr Samadian is a consultant geriatrician who works in full time employment in the NHS at certain NHS hospitals (principally St Helier and Nelson hospitals in south London) and also maintains a private practice as a self-employed medical practitioner. This is a common pattern of working for senior medical practitioners. It is in relation to Dr Samadian's income from his private practice that the question of deduction of travel expenses arises.
[3]For his private practice, Dr Samadian maintains an office at his home (where he does work relevant to that practice) and sees patients at consulting rooms hired by him at two private hospitals, St Antony's in North Cheam and Parkside in Wimbledon. He also occasionally conducts home visits. He uses a car to travel between these locations and to and from the NHS hospitals where he is employed.
[4]In relation to some aspects of Dr Samadian's travel pattern, there is agreement between him and HMRC as to the question whether the expenses of particular journeys are or are not deductible, as expenses "wholly and exclusively" for the purposes of his private practice - see the table at [21], set out below:
Journey |
Appellant's position |
HMRC's position |
|
1 |
Between home and St Helier/Nelson hospital (NHS) |
Not deductible |
Not deductible |
2 |
Between St Helier and Nelson hospitals (both NHS) |
Not deductible (though could claim against employment income) |
Not deductible (no view expressed on deductibility against employment income) |
3 |
Between St Helier/Nelson hospital (NHS) and St Antony's/Parkside hospital (private) |
Deductible |
Not deductible |
4 |
Between St Antony's and Parkside hospitals (both private) |
Deductible |
Deductible |
5 |
Between home and St Antony's or Parkside hospitals (private) |
Deductible |
Not deductible |
6 |
Between St Antony's or Parkside hospital (private) and patient's home or other care location (private) |
Deductible |
Deductible |
7 |
Between home and patient's home or other care location |
Deductible |
Deductible |
8 |
Between St Helier/Nelson hospital (NHS) and patient's home or other care location |
Deductible |
Not specifically addressed |
[5]However, as indicated by the table, there was an absence of agreement in relation to items 3, 5 and 8, namely (a) travel between the NHS hospitals and the private hospitals, (b) travel between home and the private hospitals and (c) travel between the NHS hospitals and a patient's home for a home visit. Since HMRC did not agree on the deductibility of expenses in relation to these journeys, Dr Samadian appealed to the FTT. The parties invited the FTT to decide issues of principle in relation to the deductibility of such expenses, which would then allow the extent of Dr Samadian's taxable income from his private practice to be determined and agreed.
[6]The FTT found, among other things, that Dr Samadian had a place of business, in the sense of a "generally fixed and predictable" place at which he performs work in his private practice, at each of St Antony's and Parkside ([83] and [101]). It also found that he had "a place of business at his home, where he carried out part of the professional work necessary to his overall professional practice as well as the majority of the administration work related to it" ([92] and [101]).
[7]The FTT ruled as follows: (a) travel expenses for journeys between the NHS hospitals and the private hospitals are...
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