Travel costs of bricklayer

Travel costs of bricklayer

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I have a prospect who is a self-employed bricklayer, works for several different contractors in the London area and suffers 20% CIS at source.

This guy lives in N Ireland and travels to and from N Ireland to London every weekend. Flight costs for the year are approximately £4,000 per annum. It seems (although not 100% sure of this just yet) that the current agent claims all such travel costs as business expenditure.

My initial thought was that some, if not all, should be disallowed. Would 50% be allowable on basis that the travel to London is wholly for business purposes, but the travel back from London (the other 50%) be disallowed as not for business purposes?

I have also referred to the attached HMRC guidance in their Business Income Manual:

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

This case notes the General Commissioners held travel from home to sites was not allowable, but judge seems to go on to say "In my view, where a person has no fixed place or places at which he carries on his trade or profession but moves continually from one place to another, at each of which he consecutively exercises his trade or profession on a purely temporary basis and then departs, his trade or profession being in that sense of an itinerant nature, the travelling expenses of that person between his home and the places where from time to time he happens to be exercising his trade or profession will normally be, and are in the case before me, wholly and exclusively laid out or expended for the purposes of that trade or profession."

On this basis, I'm thinking 50% in my prospect's case would be fine?

All advice appreciated folks.

Replies (4)

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By Steve Kesby
22nd Mar 2014 14:14

The right answer definitely isn't 50%

It's none of it or all of it. Claiming 50% would be fatal to a claim that it is expenditure incurred wholly and exclusively for the purposes of the business.

In Newsom v Robertson the court held that the expense of going home wasn't for the purposes of the business, but for the taxpayer's purpose of living away from the business (ie the 50% you would disallow). They went on to hold that the expense of travelling in the opposite direction (the other 50%) was equally non-allowable, since the expense was incurred simply for the purpose of undoing the previous journey.

If he has always and will always be working for several different contractors in the London area, then the costs are being incurred because he's privately chosen to continue to live in NI, so none of it's allowable.

If he works has and will work all over the UK (including NI), then there may be a basis for claiming all of it.

I imagine he has significant accommodation expenses as well. It's likely that none of it's allowable, but the problem is that there's probably an accountant down the road that will claim all of it for him.

Thanks (2)
Kieran Phelan
By KPEM online
22nd Mar 2014 14:52

Accommodation

Thanks Steve, I felt as much about the travel costs, in that he is essentially choosing to come home and be with his family, so 100% is not allowable.

He does pay for accommodation in London during the week. Is none of this allowable on the basis that this is essentially a "second home" cost as opposed to a business cost?

Do you think there is any argument for these categories of expenses being in some way allowable on the basis that he trades in London area due to better hourly rates and higher chance of ongoing works, whereas in NI the rates are too low and the chance of any trading income here is slim to none?  i.e.  a business purpose for where he opts to trade.

I am guessing not but really hoping I don't need to advise this guy that he may have expenses of £7k to £8k in past number of years that should not have been claimed on his tax return!

Thanks (0)
Chris M
By mr. mischief
22nd Mar 2014 15:58

Olympics cases

During the 2012 Olympics construction, various cases of this sort came to the Tribunals.  HMRC lost at least two of them, one a pipeworker from the Wirral and one a construction guy from the Midlands - just from memory, so the details may well be wrong.

They were held to be intinerant workers, doing things like preparing estimates and bills from their "centre of operations" which was their homes.  In principle, is there any difference between these cases and that put forward by the OP?  At the very least there is a case for the defence.

Note that in both these cases sums of well over £10k on travel and accommodation were deemed to be allowable.  As per Steve K, it is 0% or 100% no half measures here.

 

 

Thanks (1)
By Steve Kesby
22nd Mar 2014 16:38

I don't disagree...

... with Mr Mischief's points or Sparkey's further arguments. You need to be able to show that he would go pretty much anywhere in order to maximise the business profits, I guess.

The accommodation costs ought to follow the allowability of the travel costs. The jury's still out on the Tim Healy case as well, which is kind of relevant.

All the tribunal decisions that I've seen pretty much follow Horton v Young. The ones I can remember are Mellors and Kenyon.

Unfortunately, you're now playing Russian roulette a little bit. It's not really desirable to go back and change things unless it's clear-cut been dealt with incorrectly, so you need a tenable argument to justify what has been done in the past. You then need to follow the same argument going forward, otherwise it looks like even you don't agree with it!

It's one of the many problems of Self-Assessment.

Either way, the client needs to be aware of the risks. If you have a reasonable argument though, HMRC can only go back a maximum of four years.

The longer he works in the same sort of area though, the weaker any argument becomes.

Thanks (1)