The tax man has won a far-reaching business mileage claims case that could have massive implications for thousands of landlords.
The first-tier tribunal ruled that a doctor’s mileage claims to and from his home office and a hospital were not allowable business expenses.
Judges found in favour of HM Revenue and Customs, stating that although Dr Samadian had a dedicated home office, they did not accept this as a starting point for working out private practice business mileage.
In effect, any return journeys were not only for business, as Dr Samadian would be travelling back to his home, whether or not to work in his office.
The decision could become a landmark ruling and the implication is that travel expenses are denied to many people who work from home.
Instead of reclaiming the mileage costs, the trips become commuting – which is not an allowable business expense.
For landlords, this means claiming round-trips from home to a buy to let property is no longer allowed.
The case has taken more than seven years to resolve, with three tribunal hearings along the way.
Hearings started in 2006, when HMRC opened an inquiry into the claims.
The geriatrician was working full-time for various hospitals, held outpatient sessions at two private hospitals and had a home office for administration, but not for patients to attend.
He submitted weekly journeys between the NHS and private hospitals and his home and private hospitals to support a 65% business mileage and capital allowance expense claim on his self-assessment return.
HMRC rejected this and the two parties could not agree a claim, so the issue went to a tribunal.
There, HMRC said...
that because the purpose of the journey was to undo the non-business journey home, the trip could not be treated as wholly and exclusively for business purposes.
The judges found in favour of HMRC’s argument.
The ruling could affect anyone who runs a business from a home office if they have a home office for running the business but work at other locations.
Landlords who charge mileage from their homes to rental properties for business, such as letting workmen in or showing prospective tenants the property, could be affected. The implication for those with property a long way from their home or overseas could be huge.
The ruling means that if mileage is claimed for the outward or return journey HMRC could argue that it is disallowable.
Dr Samadian is expected to appeal the decision.©LandlordZONE® – legal content applies to England and is not a definitive statement of the law, always seek professional advice. If you have questions on these issues go to the LandlordZONE® Forums