Tax case ruling to affect travel claims for home based employees?

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Tax case ruling to affect travel claims for home based employees?

February 22, 2013 2013

Self employed taxes (or Schedule D in old parlance) is not our bag and so we tend not to take too much notice of what is going on in that area.

However, one self employed tax case to hit the headlines in the last week or so was of some interest to us particularly as it could have implications on the "better" tax side, i.e. PAYE.

The case we're talking about is Dr Samadian v HMRC which involved the issue of whether the self employed doctor's mileage from his home office to hospital premises qualifies as business mileage for tax purposes. The HMRC won this case (for now anyway) on the basis that home could not be considered the starting point for business travel in relation to habitual travel to the main place of work.

Now, the question of whether home can be regarded as a Permanent Workplace under the PAYE travel rules has long been an issue and it has always been notoriously difficult to get HMRC to agree that home to any other Permanent Workplace can be classed as business travel. Does the Samadian case have any impact and make this even trickier than ever for employers who have home based workers ?

The starting point in considering whether this may happen is to think about legislation. ITEPA (Income Tax (Earnings & Pensions) Act) 2003 governs the rules for employee expense payments and this legislation makes it clear that it only applies to employed workers subject to PAYE (which includes directors and office holders for completeness). Self employed tax rules come under some other legislation, the name of which doesn't exactly trip off our tongue as automatically as ITEPA Embarassed. So you would have to say that there is absolutely no reason why a tax ruling for one part of tax law should apply to a completely separate part of the law.

However, as we should all know by now, tax isn't that straight forward. It could well be that the principles applied by the Tax Tribunal in denying relief on Dr Samadian's travel could be transferred over and used in deciding contentious cases involving employees. Based on our quick scan of the Samadian judgement, the main reason for relief being denied is based on the fact that travel to each hospital was not carrying on the activities of the Doctor's business but putting him in a position to do his work. In other words, failing the "wholly and exclusively" test for tax relief. The key arguments in any employment tax case are very similar, with the added complexities of having to consider the Temporary Workplace and Permanent Workplace rules and so the Samadian judgement could well make life harder for those of us on the PAYE side in the future if the tribunal judges see some common ground between the two.

It is fair to conclude, however, that things shouldn't change that much in reality for employers or employees because of this case. Claims for tax relief on an employee's travel from home to another workplace have always been resisted by HMRC and that will continue to happen going forward, not because of the Samadian case but because HMRC already has a lot of case law and precedent ammunition in employment cases to fight their corner. The Samadian case may be rolled out if it suits HMRC and adds to their argument but as far as we are concerned it should be more or less business as usual on this side of the fence.

Best advice we can give to any employer out there with home based workers is to take proactive advice around this whole area. There is often things that can be done, or arrangements structured in certain ways, to avoid a Samadian situation. You know where we are if you want to chat or need assistance.......

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