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Sub-contractor expenses. Mileage on job searches - allowable or not?

Sub-contractor expenses. Mileage on job...


HMRC made and an enquiry on client's tax return. The client claimed some business mileage travelled to construction sites and back. Also, client was without a job for a few months and done about 4k miles on job searches going to construction sites and giving out his business cards, etc. HMRC inspector says that this expenses was not allowable as a claim cannot be made for motoring expenses incurred in trying to put yourself in a position to obtain work as this fails the "wholly and exclusively" test stipulated in the Taxes Act.

I disagree with their decision as I believe this was client's self-advertising.

HMRC asked me to advise them what legislation and under what "capacity" I am maintaining this should be allowable?

What is your opinion?


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08th Mar 2012 13:26

Don't have specific legislation (not sure if there is one), but.

.... I would start this by looking at HMRC guidance and then consider the inspectors approach. It may be that the inspector might be right, but also might be wrong. Remember it wasn't until recently that HMRC inturpreted that a normal smartphone (sold by mobile phone company's) to be a computer and not a mobile phone! Luckily common sense prevailed on this issue and it may have to in connection to your issue.

The following link is a bit of guidance from HMRC regarding self employment. It may be a starting point, or a losing point.

For me the question is whether the business was carrying on during this down time or whether the business/trade stopped and started again? If the trade stopped and then started again I can see the inspectors point. What if the client had found PAYE work, would they have taken it?

However if the trade carried on then I would agree I would consider this to be part of the overall marketing costs of getting new business. I drive to a prospective clients premises and claim motoring expenses to do so. I also advertise in the local media and claim that cost as well. As for legislation, I don't think there are any specific for this situation and therefore throw the sam equestion back at the inspector.

What other business expenses were carried on during the down time that can be use to show that the trade was continuing. How long has the individual been in business? has there been downtime in the past? If a long established self employment then this may add to your argument. If the client is in PAYE one minute, self-employed the next and so on, then this would add to the inspectors argument.

Not much help I know.


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08th Mar 2012 13:49

Travel to find work

An interesting point.  I can see where the Inspector is coming from but I think that this is wholly and exclusively for the trade. 

Part of the problem with being self-employed is finding the next contract/work.   Your client seems to have touted himself around building sites etc advising that he is available to take on extra contracts, although this was not successful.   However, it is no different really to putting an ad in the paper and similarly getting no response.  Is HMRC claiming this is not an allowable expense either, or perhaps a leflet drop?  What happens if he doesn't get a contract now, but someone he meets there phones him next year to offer a contract.   Does it become allowable then?

If you were to take HMRC's thoughts to their logical conclusion, then any expenses in respect of interviews/prospective clients would not be allowable at all - obviously a ludicus situation.

I can only suggest you resist this one forcibly stressing that travelling to look for prospective work is an integral and wholly necessary part of being self employed.   It's definately not a luxury extra.

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08th Mar 2012 14:26

I can't find a specific case but ..

If the client was self employed whilst looking for work I would play devils advocate and challenge the inspector why he thinks if fails the test. Its easy to say "the computer says no" but not come up with any reasons. I would have thought that it is no different that going to give a quote for a construction job and not getting it, he's putting himself in a position to work. The inspectors stance suggests that the subbie should sit at home and wait for work to come knocking at the door. We all know that's not how business works. If he rang around looking for work would the cost of the calls be disallowed? If you look at BIM37600 it doesn't specifically mention business mileage its about business lunches but it does talk about "wholly and exclusively" and gives the Court of Appeal definition. 

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08th Mar 2012 14:37

Challenge them....

request the specific piece of legislation, notes from their own manuals and a full and comprehensive explanation as to why they believe that a journey made to a prospective client is NOT wholly/exclusively for the purpose of the trade.


Unfortunately this is a typical employee (in the hmrc) view point....I wonder if they ever do a journey that has little benefit.....I guess they still claim their expenses even if it may be suggested that it wasn't wholly/exclusively/neccessary.....hmmm 

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By ringi
08th Mar 2012 17:24

Call it a sales call and then it may be allowed, “work” is what is searched for by employees not by self-employed people, self employee people are looking for “customers” or “contracts”.

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By DMGbus
08th Mar 2012 19:39


I think that the Inspector is getting confused with the rules for employees which are more strict than for self-employed workers.

Seeking work can take many forms: Advertising, Website, Cold-Calling, Nerwspaper, Trade Journal.  The costs of seeking customers has never, in my view, been disallowed for tax (except statute barred entertaining) purposes for companies, self-employed individuals or partnerships.

Your client has chosen the cold-calling method. 

I would be very surpised if the Inspector could come up with justification for his disallowance of the costs of seeking work (be it conventional advertising or cold-calling).

In the past 37 years in practice never have I seen advertising disallowed nor the suggestion that it should be disallowed.

This point needs to be put very forcefully to the Inspector, reminding him that your client is self-employed.  Perhaps the Inspector can state an example where advertising has been disallowed in his expereience or his manuals.

One stance the Inspector might try and take is that if the client has no active work then he cannot be incurring costs against trading.  This approach would be challengeable by pointing out (as I have done in years gone by) that a temporary lack of work does not, in itself, cause a discontinuance of the trade.  Provided that the client is seeking work then he is in fact still trading until such time as he (and he alone) makes the decision that he has ceased trading.


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09th Mar 2012 10:59

My searching skills are not good and my memory not much better but I seem to remember a case where a company had no turnover for about six years.

I believe they successfully established that they were still trading mainly because they had extensive documentation to show they were actively seeking work.  Could this be any help?

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09th Mar 2012 11:30

Was he still paying class 2?

If he was, this could help support his assertion that he was still in business, just without a contract during those months.

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