A first-tier tribunal ruled that a doctor’s business mileage claims to and from his home office and a private hospital were not wholly and exclusively allowable expenditure.
The tribunal judges decided the case in favour of HMRC in late January. They ruled that Dr Samadian had a dedicated office in his home that he needed for professional activity, but did not accept the home office as a starting point for calculating private practice business mileage for habitual journeys.
This summary is based on an analysis by Abbey Tax, which worked with one of the accountants involved in the case.
Abbey Tax consultant Guy Smith said the case was landmark due to its stance on business bases. In this case, the tribunal accepted the home was a, but not the, business base and comes down to the meaning of 'habitual' and 'itinerant'.
"Today the business base is always moving. There's a lot of co-ordination between working at home and other places of work. A lot of professions do this. During this case HMRC has ruled that businesses cannot claim expenditure to and from a home for mileage purposes," he said.
Accountants will need to adjust their thinking on wholly and exclusively in situations where self-employed professional clients work at home, but also deliver their expertise at another location on a regular basis. The effect could also extend to their own expense claims.
An accountant may regularly work at home, but then travel into the main office to conduct a meeting in the afternoon. Following the logic of the Samadian decision, HMRC could now argue that mileage is disallowable.
"You now need to look and see whether there is subconscious thinking behind a motive," Smith said. "For example, the original intent may be one thing, but the subconscious reasoning may be different. For example, buying business clothes in the case of a female lawyer who bought black suits for work. Her original intent was to buy the clothes to use for work, but her subconscious thinking was that people need to be clothed for decency purposes."
The saga started in 2006 when HMRC started an enquiry into the doctor’s claims and spanned three separate tribunal hearings.
Dr Samadian, a geriatrician working full-time for various hospitals, helds weekly outpatient sessions at two private hospitals and has a home office.
He submitted a schedule of weekly journeys between NHS and private hospitals and home to private hospitals to support a 65% business mileage and capital allowance expense claim on his self assessment return.
HMRC rejected this however and proposed an alternative business percentage of 6%, but as both sides could not reach an agreement, the issue went to tribunal.
HMRC argued that since the purpose of the journey was to undo the non-business journey home undertaken by Samadian, it could not be treated as wholly and exclusively for the purposes of business. This position was supported by the tribunal judges.