Sargent (HM Inspector of Taxes) v Barnes
| Jurisdiction | England & Wales |
| Judgment Date | 02 March 1978 |
| Date | 02 March 1978 |
| Court | Chancery Division |
HIGH COURT OF JUSTICE (CHANCERY DIVISION)-
Income tax, Schedule D, Case II - Profession - Deduction - Expenses of travelling between dentist's surgery and dental laboratory - Laboratory situated on route between home and surgery - Dual purpose - Income and Corporation Taxes Act 1970 (c 10), ss 130(a) and (b).
The taxpayer practised as a dentist in Winchcombe, twelve miles from his home at Badgeworth, near Cheltenham. He did not practise his profession at Badgeworth. On the journey, which he made by car between his home and surgery each morning and evening, he made a slight detour to visit the laboratory which he maintained in Cheltenham for the repair, alteration and manufacture of dentures, and at which a self-employed dental technician worked part time exclusively on work provided by the taxpayer. The laboratory was about one mile from the taxpayer's home. It was not disputed that the laboratory was a proper adjunct of the practice or that the work done there was exclusively referable to the practice.
The taxpayer contended that his expenditure (which the Inspector would not allow) on travelling each morning and evening between his laboratory and his surgery was deductible in computing his profits because he had two bases of operations, the laboratory and the surgery and that his business activities commenced each day at the laboratory and each evening terminated there. The Inspector contended (1) that the expenditure was not allowable, not being laid out wholly and exclusively for the purposes of the taxpayer's profession and was within the prohibition of Income and Corporation Taxes Act 1970, s 130(a), and (2) that as it was incurred at least partly for the private purpose of enabling the taxpayer to travel to and from his surgery, it was to be disallowed under s 130(b). The General Commissioners allowed the taxpayer's appeal on the basis that it was absolutely necessary for the taxpayer to travel back and forth from his laboratory in order to enable him to carry on his profession as a dentist.
Held, (1) that the Commissioners applied the wrong test in deciding that the expenditure was "necessary" as that was no guide to whether it was exclusively for the purposes of a trade;
(2) that, on the facts found, it would be a travesty to say that the taxpayer was carrying on his practice at the laboratory;
(3) that the expenditure was incurred, if not exclusively, then at least in part, for the purpose of enabling the taxpayer to get from his private residence to the surgery where his profession was carried on and the fact that he was enable to stop at the laboratory to carry out an activity exclusively referable to his business did not convert the dual purpose into a single purpose.
Stated under s 56 of the Taxes Management Act 1970 by the Commissioners for the General Purposes of the Income Tax for the Division of Northleach in the County of Gloucester for the opinion of the High Court of Justice.
1. At a meeting of the Commissioners for the General Purposes of the Income Tax for the Division of Northleach in the County of Gloucester held on 10 September 1975 in the Clerk to the Commissioners' Office, Abbey Terrace, Winchcombe, in the said County of Gloucester, Mr. Peter Albert Barnes, who carries on his profession as a dental surgeon at Wentwood House, High Street, Winchcombe, aforesaid (hereinafter called "the Respondent") appealed against assessments made on him under Case II of Schedule D as follows:
£ |
|
For the year 1972-73 |
dental surgeon-2,700 |
For the year 1973-74 |
dental surgeon-3,600 |
For the year 1974-75 |
dental surgeon-3,600 |
(All three years were based on one set of accounts for the year ended 31 May 1973, the Respondent having commenced business in that year.)
2. The Respondent, who lived at Badgeworth, near Cheltenham, and maintained a dental laboratory at The Reddings, Cheltenham, and had his dental surgery in Winchcombe, travelled by motor car each day from his home in Badgeworth to his laboratory in Cheltenham (a distance of 1 mile) and thence to his surgery in Winchcombe (a distance of 10 to 11 miles). The point at issue was whether the travelling expenses of the Respondent between his laboratory in Cheltenham and his surgery in Winchcombe was an allowable deduction for income tax purposes. The amount of the travelling expenses for the full year amounted to £170 and of this the Respondent was seeking to deduct £160. (The amount of the expenses was not in dispute.)
3. Mr. Mobley, of Messrs. Marcus Hazlewood, accountants, of Cheltenham, appeared for the Respondent.
4. The Respondent gave evidence before us.
5. The following facts were admitted or proved:
(2) The Respondent lived at Badgeworth, near Cheltenham.
(3) The Respondent maintained a dental laboratory for the purpose of the repair alteration and making of dentures in an outbuilding at his father's residence, Glenleigh, The Reddings, Cheltenham.
(4) The Respondent did not pay any rent to his father, but he did contribute towards the cost of the electricity. The Respondent provided his own gas.
(5) A self-employed technician worked on a part-time basis (although exclusively for the Respondent) at the laboratory, where he carried out the Respondent's work only. The technician did not receive a regular wage: he was paid a set rate for each job which he carried out.
(6) It was necessary for the Respondent to have the services of a laboratory to carry out his work, since his was a one man practice; the only alternative to his having his own laboratory was for him to use a postal service run by a commercial laboratory. However, it was far preferable for him to have his own laboratory since its dental services must be readily available and speedily executed in the interest of the patients.
(7) Each morning, on his way to his surgery, the Respondent spent about ten minutes at the laboratory in order to collect completed work and, as necessary, to discuss matters with his technician.
(8) Each evening, after closing his surgery in Winchcombe, the Respondent called at his laboratory in Cheltenham in order to deliver dentures and other articles which he had received during the day and, during the course of his evening visits to his laboratory, he sometimes spent 30 minutes to one hour advising on or working on dentures before proceeding on his journey homewards.
(9) The Respondent visited patients on his way from the surgery to the laboratory about twice a week.
(10) On about a dozen occasions in a year the Respondent had to travel from his surgery to his laboratory and back during working hours.
6. The Respondent contended that, to carry out his profession properly, it was essential for him to visit his laboratory every morning before going to his surgery and each evening on his way home and that his work commenced each day when he arrived at the laboratory and that the journey from the laboratory to the surgery each day was wholly and exclusively for the purposes of his profession.
7. It was contended by the Inspector of Taxes:
(a) that the travelling expenses claimed by the Respondent were not laid out wholly and exclusively for the purposes of the Respondent's profession and were not deductible in computing his profits on account of s 130(a) of the Income and Corporation Taxes Act 1970;
(b) that the expenses were incurred for the purpose or partly for the purpose of enabling the Respondent to journey to and from his home and his surgery and, as this purpose was a private purpose distinct from the purposes of his profession, they were precluded from being deducted in computing his profits by s 130(b) of the said Act;
(c) that no part of the expenses claimed was an allowable deduction.
8. The parties...
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