Contractor mileage expenses: the end isn't nigh
That’s because, contrary to widespread fears, this case does NOT affect employees, including contractors employed as a director of their own Personal Service Company (PSC), when they travel from their home to a temporary workplace.
Actually, the only thing that’s been thrown into doubt by the ruling against the good doctor is what HM Revenue & Customs accepts to constitute the ‘business base’ for workers who are ‘self-employed’ – note, not those workers who are a director-employee of their own PSC. This latter demographic of workers, which includes a one-person limited company director, has comparative clarity. Indeed, the law at Sections 338/339 of ITEPA 2003 allows them to claim the expenses incurred of travelling to work from home.
For these employees journeying to work, and assuming home is genuinely a workplace, it can be argued that the travel is between two workplaces and is an allowable expense under S337 ITEPA 2003, as long as the travel is in the performance of the duties. Such a not to be sniffed out, allowable deduction somewhat explains HMRC's reluctance to treat home as an office, unless it meets their strict criteria.
Turning to Dr Samadian, there is crucial difference. Although he was recognised by the tribunals as having a dedicated office in his home, he is self-employed, so not an employee. What the courts didn’t accept, however, is that his home-based office be regarded as the commencement point for calculating private service business mileage involved in habitual journeys.
These journeys saw him, a self-employed trader, travel from home to one of his offices, which was viewed by the authorities as not being ‘wholly and exclusively’ for business, so his claim was disallowed. Within his profession, he had some personal clients who he visited at their homes and travelling from home to a client, in contrast, was allowable, as he was, in relation to the personal client side of his business, going from his base of operations to the client’s premises. It seems to me that the tribunal was differentiating between the part of his profession that was based other than at home and the part of his profession, the itinerant part, which was based at home.
So this case, far from being a shot across the expenses bows of contractors, is more of a blow to self-employed people who undertake substantive work at home, but who also have a separate business base where they supply their expertise regularly.
Let’s take the example of a butcher. This self-employed meat supplier has two shops open to the public. When he travels from home and between the shops, his travel expenses are not allowable.
But what happens if he has private clients where he visits farms, say, to kill and prepare chickens? This work is carried out at the client’s premises, and as regards this element of his profession as a butcher it can be argued that the business is based at home but it does not make him home-based if he travels from home to either of the shops.
In light of the Samadian ruling, it follows that just because all of the butcher’s income comes from butchering meat and part of it is based at home, the work on the farms does not entitle him to claim mileage expenses on the outward or return journey to either of the shops.
For the butcher, the doctor and anyone else operating as self-employed (not an employee of one’s own company), the taxman appears to no longer be approving business mileage claims for private sector work where there is business base at the provider’s home and the travel is to another business base.
In short, it’s a case of ‘as you were’ on mileage expenses, assuming you are contractor employed by your own limited company as its director, but ‘watch this space’ if you’re self-employed, home-office run and have an additional business base.
The author is Bob, a retired tax inspector.