Subcontractors' travel
Hakeem Adeleye, on 11 August 2007, queried whether there had been any change in the law regarding the travel expenses incurred by construction industry subcontractors between home and various sites since the decision in Horton v Young 47 TC 60.
HMRC had opened a self assessment enquiry into two construction industry subcontractors. All matters had been agreed except travel. The inspector had stated that travel expenses could only be claimed if they concerned travel from site to site, not home to site. The revenue view in these cases was that, although the workers worked on various sites during the year, this did not make them 'itinerant traders'. The inspector quoted Horton v Young in support of their views, as well as HMRC Business Income Manual BIM 37620. Hakeem had never encountered this approach during 13 years of dealing with subcontractors' affairs, and wondered whether Horton v Young had been overruled. He had found BIM 37605 interesting reading.
Glyn Roberts answered this query, and drew attention to a number of items in the Business Income Manual. In BIM 37935 inspectors are advised to disallow home to site travel expenditure unless the subcontractor concerned was an 'itinerant worker'. In BIM 37620 Mr Justice Brightman is quoted as saying that there is a fundamental difference between a shopkeeper who travels from home to his shop, and self employed persons who travel from home to a number of locations. Glyn also drew attention to a quotation in the (now withdrawn) Inspector's Manual, and I will refer to this later on.
BIM 37620 also states that where the trader's base of operations is the home, then home to site travel should be allowable. The example given of a jobbing builder fits nicely with that of a construction industry subcontractor. Glyn went on to say that the nature and place of the subcontractor's business is important. If significant or minor duties are performed at home, then home to site travel should be claimable. Mr Justice Brightman had held that the home could still be regarded as the business base if only minimal duties were performed there.
My opinion of this case is, that unless the two subcontractors worked on only one site during the year of Enquiry, then the inspector is 'flying a kite'. In Horton v Young the subcontract bricklayer had the home as his business base, wrote up his books there and took telephone calls there. The decision in the taxpayer's favour, which clearly the revenue does not like, was made in the Court of Appeal.
If, as a minimum, the two subcontractors worked on different sites during the year and had their homes as the business base, then I cannot see how the Revenue could succeed on appeal. Writing up the books of account at home helps the case, as does the use of a home phone to contact main contractors. Involving the wife or partner in the bookkeeping is even better.
Glyn referred to a quotation from the Inspector's Manual and this is now reproduced in the Business Income Manual at BIM 37675, as follows:
‘Following the decision in Horton v Young, where a subcontractor works at two or more different sites during the year, travelling expenses between the taxpayer's home and those sites should normally be allowed'.
This statement seems to me to be conclusive, and how an inspector could say that subcontractors working on different sites were not itinerant workers escapes me.
This type of case can be distinguished clearly from other cases where the taxpayer failed to claim travelling expenses. In Powell v Jackman, a franchise milkman failed in his claim for travelling expenses between his home and the dairy, where he drove in order to pick up his delivery vehicle.
Similarly in Newsom v Robertson 33 TC 452, a barrister who worked both at home and in his chambers in London, failed in his claim for travel expenses. In Sargent v Barnes 52 TC 335, a locum dentist failed in his claim that, by visiting a supplier on route between home and the surgery, a claim for travel expenses could be made.
Unless the facts dictate otherwise, then Hakeem needs to call the inspector's bluff in this case.
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