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Is there any chance HMRC could validly claim this car is available for private use?

Is there any chance HMRC could validly claim...

Facts as follows:

  • Pool car parked out side proprietor's house overnight.
  • Proprietor has another car with some private use.
  • Keys kept in office ¼ of a mile away from proprietor's house.
  • Pool car used, for business only, by two members of staff, one of whom is proprietor's girlfriend who lives with him at his house (where pool car is parked).

Is there any chance HMRC could validly claim the pool car is available for private use?

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24th Feb 2016 19:10

Yes

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By chatman
24th Feb 2016 19:15

How strong a case for available for private use?

Thanks cheekychappy. How strong a case do you think they would have for available for private use?

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24th Feb 2016 19:20

Just to confirm
Is the proprietor a director?

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By chatman
24th Feb 2016 19:26

Proprietor not a director

cheekychappy wrote:
Is the proprietor a director?

No.

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By Ruddles
24th Feb 2016 19:21

Very strong

.

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24th Feb 2016 19:45

Thanks for clarifying.

Presumably there is a second set of keys at the home. A second set of keys would make the car available for use by the girlfriend.

There's also the argument that the girlfriend is commuting, and it is therefore available for private use.

I also presume, because you do not mention it, that there are no contracts that specifically exclude any private use. Given that the office is 1/4 of a mile away. This could have been structured as a solid pool car hadn't the car been taken home.

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By Ruddles
24th Feb 2016 19:53

Hang on

Who owns the car and whose private use are we talking about here?

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25th Feb 2016 10:17

This ....

Ruddles wrote:

Who owns the car and whose private use are we talking about here?

Also, are you saying that the "pool" is just your client and his girlfriend ? (is she connected with the company ? - ie. a director or employee ?).

Trying to say that the keys are kept 1/4 of a mile away (ie a 2 min walk) without mentioning duplicate set of keys is a bit weak.

Does your client keep a log of mileage on this pool car ? - if it does 10,000 miles a year and 9,000 of them are run up by his girlfriend at the weekend then this might give you something to think about.

On the face of it, sounds like your client has been speaking to his mate down the pub etc.

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By chatman
25th Feb 2016 11:23

@Ruddles

Ruddles wrote:

Who owns the car and whose private use are we talking about here?

The business owns the car. The private use that might be alleged is that of any member of staff (in order to prevent it being a pool car).

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25th Feb 2016 07:46

There is certainly a chance...

Hi Chatman, I think there is certainly a chance that HMRC could question the treatment of the car as a pool vehicle.

You may find this link helpful;

https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim23450

Contained in Sections 167 & 168 of ITEPA 2003 HMRC state that all of the following conditions must be met to ensure that the vehicle is indeed a pool vehicle;

it was made available to, and actually used by, more than one of those employeesit was made available, in the case of each of those employees, by reason of the employee’s employmentit was not ordinarily used by one of those employees to the exclusion of the othersin the case of each of those employees, any private use of it made by the employee was merely incidental to the employee’s other use of it in that year (see EIM23455), andit was not normally kept overnight on or in the vicinity of any residential premises where any of the employees was residing, except while being kept overnight on premises occupied by the person making it available to them (see EIM23465).

Assuming the first 3 points are satisfied this leaves us to consider the final 2 (point 4 & 5).

Does the car remain outside the proprietors house until required for a business journey? If so, point 5 should then be satisfied as the vehicle is being kept outside the premises where the person making it available resides. 

Does the girlfriend commute the very short distance to work in it? If so, even as merely a passenger (the proprietor should be okay driving the vehicle to business premises) then this may be the stumbling block as undoubtedly HMRC would seek to classify this as commuting on the girlfriends behalf, as @cheekychappy has rightly pointed out.

 

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25th Feb 2016 10:19

.

If the question was reversed to "is there any chance this might just be  pool car?"

I think you would get a resounding. "no"

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25th Feb 2016 10:31

Why are people made to just piss[***] in the wind on here. You are not even asking the right question.

Even the  straight "No" to "is the proprietor a director" is frigging useless.

Is the business unincorporated?

For an unincorporated business the issue for "the proprietor" is whether there is actual private use (by the proprietor or his funbuddy) and how much of it there is.

For the funbuddy the issue is whether it is made available for her private use by reason of her employment which I very much doubt.

Ask a sensible frigging question if you want a sensible frigging answer!

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26th Feb 2016 09:38

A fair point ....

Portia Nina Levin wrote:

Why are people made to just piss[***] in the wind on here. You are not even asking the right question.

Even the  straight "No" to "is the proprietor a director" is frigging useless.

Is the business unincorporated?

For an unincorporated business the issue for "the proprietor" is whether there is actual private use (by the proprietor or his funbuddy) and how much of it there is.

For the funbuddy the issue is whether it is made available for her private use by reason of her employment which I very much doubt.

Ask a sensible frigging question if you want a sensible frigging answer!

..... and well made.

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By chatman
25th Feb 2016 11:20

Clarification and more Detail

Thank you all, particularly daleryans, for your responses. My OP was clearly lacking in clarity and one important detail.

This is a sole trader, hence my term "proprietor". I realise this just means the owner of the business, and does not necessarily preclude shareholders, but I thought people would make this assumption. I accept I was wrong here.

I assumed the proprietor would not be considered to be staff, as he could not employ himself but again, I accept I was wrong. The two members of staff do not, therefore, include him.

He has told me the keys are kept at the office, so I can only believe him. As with any vehicle, there could be any number of spare sets in the possession of any member of his staff, household or extended family, but he has not told me that this is the case.

I was particularly unclear on one aspect: they cannot park outside the office due to restrictions, so they park in the director's road, where he has a permit. In fact, the closest place they can park to the office without getting fined and/or towed away is in the director's road.

This means the girlfriend cannot drive to the office. Well, she could, but she would have to drive home again to park, rendering it rather pointless.

No member of staff is allowed to use the car for private journeys. The girlfriend uses the proprietor's car for private journeys.

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25th Feb 2016 11:28

Not a pool car, because it fails test 5, contrary to daleryans assertion.

If it being kept on the public highway in the vicinity of the place that one of the employees (the funbuddy) is residing, then it is not being kept on premises occupied by the person making it available.

However, if, as a matter of fact, the employees are not permitted (by the employer) to use it for private use, then it is not available for their private use, based on the decision in Gilbert v Hemsley.

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25th Feb 2016 13:05

Also apply the 'DIMS' test

'DIMS' = does it make sense?

What/when do circumstances arise that the car is needed?

From a pure business perspective, is it sensible to maintain and run a car for the alleged usage?

Is the type of car appropriate for the type usage?  Once had a client with a Rolls Royce pool car that HMRC accepted, as it was appropriate to use it to ferry prime clients about.  And yes, it was kept at the directors home to "stop it getting scratched".

How many miles pa does the car do, and does this tally with the other explanations?

What type of insurance policy does the vehicle have?

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By chatman
26th Feb 2016 08:41

Sounds like safe from HMRC challenge then.

So, as the employer does not permit the employees to use the car for private journeys, it sounds like the car is not available for private use and it meets the criteria to be considered a pool car. Does anyone disagree with that?

Again, I am at fault for not making clear at the outset that private use was prohibited. I thought it was obvious that I would not even have bothered to post the question if private use was not prohibited, but clearly I was wrong on that too. When you already know the facts, it is difficult to remember which ones are not obvious to to people who might be reading the question. Sorry.

@Vaughan Blake1 - Thanks for your response; it satisfies all your tests.

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26th Feb 2016 09:41

Yes, me

chatman wrote:

So, as the employer does not permit the employees to use the car for private journeys, it sounds like the car is not available for private use and it meets the criteria to be considered a pool car. Does anyone disagree with that?

How does the "pool car" get outside the proprietor's house ?  Does the girlfriend drive it there by any chance ?

At the end of the day, chatman, it's HMRC you have to convince, not us.  Good luck with it.

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26th Feb 2016 09:27

Pool Car

For me it is not a pool car and fails at least two points.

 

Maybe if you comment on each point how you think it satisfies each requirement, we can comment further.

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By chatman
26th Feb 2016 12:25

Sorry - pool car issue was a distraction

I must apologise again. The pool car issue is entirely irrelevant. I was really only concerned about whether it could be considered available for private use, because S114 (1) of ITEPA 2003 says

This Chapter applies to a car or a van in relation to a particular tax year if in that year the car or van—

(a)is made available (without any transfer of the property in it) to an employee or a member of the employee’s family or household,

(b)is so made available by reason of the employment (see section 117), and

 

(c)is available for the employee’s or member’s private use (see section 118).

 

The employees are expressly forbidden from using the car for private journeys, it is not used for private journeys, and the vehicle is parked as close as possible to the office. The parking location is not dictated by the employee's residential location.

So my question is still about the availability for private use. I am sure I have heard about a case in which the only practical place to park a car overnight was near the director's house and that, consequently, the fact that it was parked overnight near his house did not mean it failed the available-for-private-use-test. Might be wrong though!

If you ignore the word "pool" in my OP, my question should make more sense (hopefully).

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26th Feb 2016 10:28

I suppose if the girlfriend

drives it home in the evening then walks with the keys back to the office and leaves them there then it isn't commuting. I bet she doesn't do that in the pouring rain though.

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By chatman
29th Feb 2016 17:57

Girlfriend being the last one to use the car at night.

Duggimon wrote:
I suppose if the girlfriend drives it home in the evening then walks with the keys back to the office and leaves them there then it isn't commuting. I bet she doesn't do that in the pouring rain though.

She doesn't use it nearly as much as the other guy, but if she was the last one to use it at night, then she would have to end the journey in her road as they can't park it anywhere else. She might decide not to take the keys back till the following morning; I don't know but it is very possible. It wouldn't be the case normally though as she is not the one who normally uses it.

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29th Feb 2016 18:02

Out

chatman wrote:

Duggimon wrote:
I suppose if the girlfriend drives it home in the evening then walks with the keys back to the office and leaves them there then it isn't commuting. I bet she doesn't do that in the pouring rain though.

She doesn't use it nearly as much as the other guy, but if she was the last one to use it at night, then she would have to end the journey in her road as they can't park it anywhere else. She might decide not to take the keys back till the following morning; I don't know but it is very possible. It wouldn't be the case normally though as she is not the one who normally uses it.

You're talking yourself out of this.

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By chatman
29th Feb 2016 19:48

Really?

lionofludesch wrote:
You're talking yourself out of this.

Really? Everyone else seems to think I am trying to convince myself of it against all logic and reason.

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26th Feb 2016 10:45

Indeed

And what evidence is there that the keys are at the office overnight ?

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26th Feb 2016 12:17

so does the

client keep a business mileage log of all of the journeys undertaken in the car by any employees - and does the mileage reconcile with the mileage on the car at the start and end of each week/month?  Does the insurance on the car only cover business use?

 

 

 

 

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26th Feb 2016 12:19

two issues?

Two issues appear to be:

1) should there be a private use disallowance?

2) is there a bik for any of the employees?

Re 1: I always feel that 100% business use is difficult if the sole trader does not have use of another vehicle for private use.

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26th Feb 2016 12:43

I think you will be safe

based on the comments above.  However i hope there is not a PAYE inspection when I feel you the Accountant may have a hardtask.

For the amount involved can not the business rent a garage and put the ""Pool Car "" in it at night and at the weekend.  As I see it the car would then be kept on business premieses.

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By chatman
26th Feb 2016 13:12

PAYE Inspection and Garage

pauljohnston wrote:
I think you will be safe based on the comments above.  However i hope there is not a PAYE inspection when I feel you the Accountant may have a hardtask.

Hi Paul - If you think I will be safe, why do you think I may have a hard task in the event of a PAYE inspection?

pauljohnston wrote:
For the amount involved can not the business rent a garage and put the ""Pool Car "" in it at night and at the weekend.  As I see it the car would then be kept on business premieses.

I had never thought of that because I haven't seen any garages between the office and the proprietor's home, but your question prompted me to look, and there are actually some underground car parking spaces available for rent, which would do the job. However, these will undoubtedly be more expensive than parking in the proprietor's road, and if I recommend this, he is sure to ask me how sure I am that parking in his road will be a problem.

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26th Feb 2016 14:32

Hi Chatman

The difference between what is right and what a PAYE inspector thinks is right is sometimes a big gap.

One of my colleaguesw had an inspection and the chap was particularly awkward in agreeing that no PAYE was due when dealing with a pool car.

With regard to the garage.  This is something for you to decide whether to discuss with your client.  I would bring it up because if client turns it down and there is an inspection then you can not be blamed.

Furthermore despite what you have been told if the car is was ever used for private use putting it in a garage would make the PAYE inspectors job a lot more difficult.

With regard to expense - putting it in a garage could well improve its value on sale as well

 

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26th Feb 2016 16:39

doesn't

seem be any real proof that there is only business use.  Does the car insurance support the 'facts', does the mileage/fuel charged in business account support the 'facts'? (although I guess no such records exist).

 

The circumstances attract suspicion - so to prove otherwise the client needs to take all steps to prove no private use (only IMHO) - based upon the 'facts' alone I wouldn't fancy defending the claim. 

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By chatman
29th Feb 2016 17:51

Lack of parking facilities not very relevant?

OK, so it sounds like the fact that the proprietor's road is the nearest place to the office that the car can be parked without paying for garage space does not carry much weight. Is that correct?

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01st Mar 2016 09:59

@Chatman

I feel you have misinterpreted waht I said.

It is not the parking facilities that make the difference in my view it is the fact that it is not parked at the Owners house that does.

As others have said there could be a temptaion to use it for a private trip.  As I said consider how you would convince a PAYE inspector that there was no private use when it is parked outside the house....

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By chatman
01st Mar 2016 12:39

Convincing a tribunal

pauljohnston wrote:
how you would convince a PAYE inspector that there was no private use when it is parked outside the house....

Sorry, I missed this. If it came to a tribunal, I would point to the availability of another vehicle, the impracticability of using the car for commuting and the necessity (as opposed to preference) to keep the car parked in the road in which they live. Nothing is a sure thing; it comes down to weight of evidence.

Like I said before, if I had never heard of the case in which a company director won a benefit-in-kind case on the grounds that the company car was parked near his house, I never would have posted the question.

Obviously if she sometimes used the car to drive to the office, this would be ordinary commuting and there would be a BIK.  What I do not know is if even being given a lift to the office one time in the year by the other user of the car, before he goes to his appointment, counts as ordinary commuting. Of course if it does, the client is scuppered, and I wouldn't even attempt to convince HMRC. If anyone has addresses this last question, I apologise for missing it.

 

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01st Mar 2016 10:13

She doesn't use it nearly as much as the other guy, but if she was the last one to use it at night, then she would have to end the journey in her road as they can't park it anywhere else.

Do you mean commuting?

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By chatman
01st Mar 2016 10:51

No commuting

cheekychappy wrote:

She doesn't use it nearly as much as the other guy, but if she was the last one to use it at night, then she would have to end the journey in her road as they can't park it anywhere else.

Do you mean commuting?

No, there isn't any commuting. There is no parking anywhere near the office, so not possible to commute. Unless, I suppose, the other guy came to pick the car up in the morning, picked her up, dropped her at the office and then headed off to his appointment, but I would have thought that would be no more common than any other person using a works vehicle for a prohibited purpose.

 

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01st Mar 2016 10:19

as Paul says

its a Revenue inspector you need to convince....where the car is parked (outside home) gives more opportunity for PU - how do you propose to prove otherwise?

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By chatman
01st Mar 2016 11:00

My Question

justsotax wrote:
where the car is parked (outside home) gives more opportunity for PU - how do you propose to prove otherwise?

You can never prove anything absolutely. My question was about weight of evidence. If the car was not parked in the same road where a member of staff lives with the boss, I would not have bothered to post the question. I posted the question because:

(i) that fact raises the issue of availability for private use, and

(ii) I am sure I heard of a case where a director had to park the company-owned car near his house for security reasons and won at tribunal.

The second of these points led to me conclude that the presumption of availability for private use when the car is parked near the home is, in rare cases, rebuttable. However, I don't know whether the facts in this case are sufficient to rebut it.

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01st Mar 2016 10:53

i would agree chatman...

so I suspect the best way to prove only BU is a log of who/when/and how many miles the car does each week...if that doesn't happen I wonder how easy it will be to prove no PU.

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01st Mar 2016 10:54

Are you sure?
Because driving from the office to her private residence sounds very much like ordinary commuting to me.

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By chatman
01st Mar 2016 11:33

I don't understand the question

cheekychappy wrote:
Are you sure? Because driving from the office to her private residence sounds very much like ordinary commuting to me.

Of course driving to the office is commuting. I'm not sure why you say it "sounds very much like ordinary commuting to me". Why wouldn't it be?

Can you please clarify your question; am I sure about what?

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01st Mar 2016 11:42

Because

chatman wrote:

cheekychappy wrote:
Are you sure? Because driving from the office to her private residence sounds very much like ordinary commuting to me.

Of course driving to the office is commuting. I'm not sure why you say it "sounds very much like ordinary commuting to me". Why wouldn't it be?

Can you please clarify your question; am I sure about what?

If it is ordinary commuting, it's available and used for private use, isn't it?

 

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By chatman
01st Mar 2016 12:07

.

cheekychappy wrote:

chatman wrote:

cheekychappy wrote:
Are you sure? Because driving from the office to her private residence sounds very much like ordinary commuting to me.

Of course driving to the office is commuting. I'm not sure why you say it "sounds very much like ordinary commuting to me". Why wouldn't it be?

Can you please clarify your question; am I sure about what?

If it is ordinary commuting, it's available and used for private use, isn't it?

 

If the employee used the car to travel from home to the office, that would be commuting. The point is, she couldn't drive herself as there would be nowhere to park. As I said, it is possible the other guy might drop her off if he is ever taking the car first thing, but unless it was absolutely pissingp*ssing down, it would probably be much more convenient to walk (definitely quicker, given the traffic at that time of day). If it did happen it would be so infrequent as to be insignificant. It might be the case that even if this happens once a year, that is enough to constitute availability for private use. Is that the case?

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01st Mar 2016 11:03

There is a reason that this thread is not going anywhere.

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01st Mar 2016 11:34

I agree PNL...

nothing absolute...but the only facts that appear so far is that the car is parked in the directors drive.  In the absence of wishing to provide (or take the effort to) any other substantial proof except a piece of paper claiming no PU (ad circumstantial evidence...keys held at office) then the answer to the original question is yes.  (and why wouldn't an inspector come to that conclusion) 

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By chatman
01st Mar 2016 11:54

No need to respond to this thread.

Can I please ask that anyone who is irritated by my stupidity and/or ignorance stop responding to this thread. Thanks.

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01st Mar 2016 11:54

Under what frigging circumstances does the funbuddy use the frigging car? Is personal use, including commuting prohibited?

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By chatman
01st Mar 2016 12:01

My frigging anwer

Portia Nina Levin wrote:
Under what frigging circumstances does the funbuddy use the frigging car?

None.

Portia Nina Levin wrote:
Is personal use, including commuting prohibited?

Yes.

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01st Mar 2016 12:09

Chatman,

You have tested my patience throughout this thread. I have continued to bite my tongue and continue to help because you are a regular contibutor.

You say that the private use is strictly prohibited.

However, you go on to say the girlfriend / funbuddy uses the vehicle for ordinary commuting.

Ordinary commuting is private use.

So is the vehicle used for private use or is it not used for private use?

The lack of parking space at the office is a red herring.

Cheeky.

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By chatman
01st Mar 2016 13:08

@cheekychappy

cheekychappy wrote:
Chatman, You have tested my patience throughout this thread. I have continued to bite my tongue and continue to help because you are a regular contibutor. You say that the private use is strictly prohibited. However, you go on to say the girlfriend / funbuddy uses the vehicle for ordinary commuting. Ordinary commuting is private use. So is the vehicle used for private use or is it not used for private use? The lack of parking space at the office is a red herring. Cheeky.

I must admit I didn't realise you were biting your tongue; I thought you were expressing anger from your first post, which was a one-word answer with no attempt at explanation. The third one contained three assumptions which I would have thought would normally have been put as questions by someone who was not so angry. Later you said "driving from the office to her private residence sounds very much like ordinary commuting to me" which sounded very facetious and condescending and implied (incorrectly) that I had stated otherwise. I also felt that, when I made it clear that I understood that driving herself between home and work was commuting but expressed doubt as to whether it would count if the other member of staff, extremely infrequently and certainly not regularly, dropped her off before continuing to his appointment (in the same way that any employee in any organisation might make an unauthorised journey) , you made no attempt to address my doubt, simply restating the definition of commuting in  tone which I felt was designed more to express derision than to inform. I feel terrible that I have upset you so much. Please do not try to help me again on this or any other thread.

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