Self Employment travel and subsistence issue with a Compliance office

Self Employment travel and subsistence issue...

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Have a friend who has come to me in a bit of a panic, looking for help. Not really my area, so looking for advice.

He is mainly employed in the construction industry, but over the last couple of years has had a few spells under CIS as well as being employed and also unemployed. He would normally work away from home
His return for 2009 had a compliance office check for his self employment. This period was for a few months working away from home under CIS and he claimed as expenses travel, accommodation and subsistence. The subsistence was claimed as a rate per day but was not excessive, probably very low for his breakfast / evening meals etc.
The Tax Officer in the compliance section has ruled that none of these are eligible as not incurred wholly and exclusively in the performance of trade. His tact was that the ‘base of operations’ was the place of work, about 200 miles from his house, which was his trading address, so all costs to travel and stay away from home have been  disallowed by this ruling.
He also went on to ask about self employment in the 2010 return which has 2 periods of self employment and 2 periods of employment all away from home in different areas as well as being unemployed. The letter also mentions penalty clauses and fines and received a lot of pamphlets with it, plus a paragraph at the end to ask if he will accept this to allow the officer to close the file and send him a revised bill. If these costs are disallowed, then most of the increased income then falls into higher rate tax for the year and would also be subject to National insurance on the profits.
My friend wrote back to say he did not accept the officers decision and that all the costs where incurred Wholly and Exclusively, as could not perform this job without travelling and staying close to the workplace. He also asked why he is looking at 2010 as this was not the year under review
The officer rejected this and sent him a lot more HMRC leaflets highlighting his points, referring to case law etc. Though some of the other points on these notes seem to contradict what the officer is saying. The officer replied that he can look into 2010 without having to open up a compliance file for that year as the points may be related.
Can anyone help with rulings, case law, websites etc? The guy has a young family and has had a few period of unemployment over the last few years so is not really in a position to pay at present, so is a bit stressed.
He also feels he has been unfairly treated as he mentioned that the HMRC have been continually reviewing his employment returns any time he has done them in previous years. (Don’t know the details, but seems unusual) He wants to fight it as he is fed up getting reviewed, plus he believes the costs were legitimate, but he is not sure what to do

Replies (10)

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By CathyB
17th Nov 2010 10:08

Travel & Subsistence

Oh dear.  I am afraid that this is currently a favourite area of challenge by HMRC.  Check out the recent Tribunal decision in Manders 2010 TC00600.  Then look at the old favourites

Newsom v Robertson

Horton v Young

Jackman v Powell 


Good luck!

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By justsotax
17th Nov 2010 10:23

Suggest taking professional advice....

the Revenue will think twice about how hard they challenge if your friend is represented....

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17th Nov 2010 10:28


any info will be better than what he has at the moment

from my time doing tax exams (a good few years ago), would have thought it was all allowable, was surprised when he showed me the letter from the taxman disallowing costs.

his point was that as an employee he could get the expenses paid, so why not when he was self employed.

if he paid someone to work for him, he could pay their expenses, so why not when he did it himself.

not a very consistent approach.


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By justsotax
17th Nov 2010 11:48

Not sure I agree regarding the inconsistent approach

What they seem to be arguing is that the place of work is permanent in nature (the one 200 miles away), making the journey to (and costs relating to) part of the individuals ordinary commute.  That is no different to being employed in London but living in Manchester.....the employer (unless a very kind one) would not normally offer to pay for your travel to and from Mcr (and if he did it would be deemed a benefit as in this scenario the commute would be ordinary in nature).  Thats not the same as being employed in Manchester and then temporarily working in London.

Obvioulsy we don't have the benefit of all the facts, but hopefully getting some advice may help defend/challenge the Revenue view.


Good luck



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By valentino rossi
17th Nov 2010 14:06

My advice

Tell your friend to go a see an accountant. They should offer a free initial meeting where he can present them with all the facts of the case including the correspondence from the Revenue.

They will then provide him with a quote for fighting it for him and hopefully an idea of how successful they believe they will be. He can then compare this to the tax payable and decide if he should carry one with the fight.

A ggod accountant shouldn't really fight a case where his fees will exceed the tax due in the future. Your friend should also note that if he conceeds this arguement the inspector can go back and it means he will be unable to claim these expenses in future years.

The Revenue are very clever in the way they target taxpayers that are not represented as they see them as an easy target and also they feel they can baffle you with case law and references to legislation.


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By thomas34
17th Nov 2010 15:38

Staying Away

The Revenue's own manual under BIM37670 says that "where a business trip necessitates one or more nights away from home, the hotel accommodation and reasonable costs of overnight subsistence (evening meal and breakfast - my addition) are deductible (Edwards v Warmsley Henshall and Co.)

The daytime subsistence is more difficult and is best not pursued (under the duality of purpose argument).

BIM37670 is badly written anyway when it refers to two instances of subsistence being allowed - (1) an itinerant business & (2) journeys outside the normal pattern. It then combines the two events by its heading "Itinerant trade journeys outside the normal pattern" inferring that both criteria need to be satisfied.

I've been white boxing all subsistence claims on the basis that a failed argument may restrict any damage to the year under investigation. I'm not sure it's any guarantee but the rules are still a shambles.




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By Steve Holloway
17th Nov 2010 15:43

Not optimistic.

In general a self-employed person either has a normal place of work or is itinerate. Travel to the former will always be disallowed whereas someone with lots of different 'sites' will have all of their travel costs allowed. If during the year under review your freind only in fact had this one place of work (for self-employment purposes) then it is difficult to argue with the inspectors analysis. Subsistence is even more difficult to claim for a self-employed person. In reality it would need to be connected to a necessary overnight stay on business. I appreciate that you believe this to be the case here but if the inspector doesn't accept the travel aspect he by default must also disallow the accomodation and subsistence.

What an employee might or might not have been able to claim is not relevant as your are dealing with two diiferent sets of rules.

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17th Nov 2010 16:05

Subsistence and Advice

Firstly did say to him to go see a tax accountant. as he was unemployed for a good few months this year, so he was reluctant to do this. 

he was worried about the costs also, on top of a big tax bill if he loses, but it may be worth it in the long run to get good advice.

re the Subsistance, iirc, this was for breakfast and evening meals as these costs were seperate from accomodation.

think it was £20 per night he had claimed for subsistance, so not unreasonable.

He did not want to go self employed under CIS, but this was on job open for him a the time. he had a higher rate as he had to travel.

As a pipefitter, when he works, he is normally away from home. When employed he was on a lower rate but has his expenses paid.

As for the travel, he needed his car to carry his tools about, so could only do this by car, so thought this may have merit.

also would need somewhere for the tools at night,so linked to the accomodation, though he probably kept them in the car, not sure.

did suggest speaking to his MP also, due to what he said was his past history with HMRC. he thinks he is an easy target.

thanks for the replies so far.




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By justsotax
17th Nov 2010 16:45

alternative view....

perhaps the Revenue have challenged on this occasion because he has made basic mistakes in previous tax returns, incorrectly claiming tax relief etc etc.  You will know better than me, but if he has done this several times then I guess the Revenue would be keeping an eye out, especially if he hasn't got an agent looking over the workings.....but what do I know.

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19th Nov 2010 10:18

re alternative view

Not sure what the previous challenges where on, but think he was employed at the time.

dont think he does a return every year also. he was a bit vague when I asked him about it, as if he was not really sure himself.

he is working away from home at the moment, back on employed staus, and was going to catch up with me on his return.

Will revue the cases mentioned above, and say to him again about finding a good tax accountant,


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