Motor Expenses under Attack by HMRC

HMRC have won a significant case relating to motor expenses which, if not subject to a successful appeal by the appellant, Dr Samadian, is likely to be extremely bad news for business owners in general and professionals who have a home office base.

The doctor in question lost his claim to deduct travel expenses from his home office to the hospitals where he undertook private work.  One of the most significant factors in the decision against Dr Samadian was the fact that there was a mixed motive involved in the traveling, as this involved returning to the place where he lived.

There was no doubt in this case that the doctor performed a significant amount of his professional services at his home office, as indeed many professionals do.  HMRC attacked both journeys between his home and the locations for the private clinics, and also journeys from NHS hospitals, where he was employed, and the private clinics.

HMRC successfully argued that the motive, objective, and purpose of Dr Samadian’s journeys between his home and the private hospitals were to take him from the location where he lived and to get him back to it.  Despite the business activity that was undertaken at his home office, it is evident that part of the expenditure was simply to get him to and from his home.  For expenditure to be deductible for a business it has to be “wholly and exclusively” for the purpose of the business.  Where there is mixed use, then it cannot fulfil this test and there have been a number of court cases that have upheld this decision.

Whilst this seems in essence to be extremely unfair, the law is the law, and if the decision is not overturned on appeal it will stand.  Armed with this new weapon in their armoury you can expect an attack on travel expenses where such travel includes journeys between home and a regular workplace.

If you feel that you are affected, then you need to discuss this with your accountant to determine a plan of action.  Alternatively please contact us at DEB Chartered Accountants where we would be delighted to discuss this or any other business matter with you.