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Business Income Manual

HM Revenue & Customs
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Wholly and exclusively: duality of, or non-trade, purpose: travel costs: home to work

S34 Income Tax (Trading and Other Income) Act 2005, S54 Corporation Tax Act 2009

The base of operations - a useful pointer in some cases

The cost of travelling from home to place of work is generally disallowed, representing as it does the (private) choice of where to live and that such is separate from the place of work. It does not matter that the taxpayer may at times work at home or keep their business records, materials, tools etc at home. Everyone needs a place to live and the journey from their place of residence to place of work is, at least in part, occasioned by the private choice of where to live. So the journey will have a dual purpose and the cost is not allowable.

In the case of Newsom v Robertson [1952] 33 TC 452, a barrister carried on his profession partly at his chambers in Lincoln’s Inn and partly at his home in Whipsnade. When the courts were sitting, the barrister did the greater part of his work at his chambers, but took work home in the evenings and at the weekends. When the courts were not sitting, the barrister worked at home apart from occasional visits to chambers. The barrister claimed the costs of travelling between home and chambers.

In the High Court, Danckwerts J said that the expenditure was not allowable because it was incurred for the purpose of allowing the taxpayer to travel between his place of residence and his place of work. It did not matter that the taxpayer carried on his profession in two places: the chambers and his home. At best, the journey served a mixed purpose, see page 460:

`It is quite true that the Appellant carries on his profession at two places, but he travels between those two places not simply for the purposes of carrying on his profession, but also because his home, as the Commissioners have found, is at the Old Rectory, Whipsnade. He travels backwards and forwards between his home and his chambers in 15, Old Square because he has to live somewhere, and because he wishes to go backwards and forwards between his chambers and his home. It does not seem to me that it makes any substantial difference that he also carries on his profession and does a lot of work at a place which happens to be his home. His motive, his object and his purpose in travelling between these places, as it seems to me, are mixed.’

In the Court of Appeal, Romer LJ agreed that no allowance was due because the journey from home to office was for the purpose not to enable the taxpayer to do his work but to allow him to live away from it, see page 465:

‘Now it is, of course, true that on days when Mr. Newsom has to appear in Court in the Chancery Division the expense of his journey to London from Whipsnade is incurred for the purpose of enabling him to do so in the sense that if he did not come to London he could not earn his brief fee. But if this view of the position were sufficient to justify the deduction of his fares to London for Income Tax purposes every taxpayer in England whose profits are assessable under Schedule D could claim as a permissible deduction his expenses of getting from his place of residence to his place of work. On the other hand, it could scarcely be argued that the cost of going home at the end of the day would be similarly eligible as a deduction and it would be a curious result of [what is now S34(1)(a) Income Tax (Trading and Other Income) Act 2005] that the morning journey should qualify for relief but that the evening journey should not. Mr. Newsom, in a letter to the Inspector of Taxes, frankly disclaimed any right to relief founded merely on the ground of having to proceed from his home to his place of work and conceded that a man’s “profession is not exercised until he arrives at the place at which it is carried on”. In my judgement this proposition is, in general, true. Moreover, it cannot be said even of the morning journey to work that it is undertaken in order to enable the traveller to exercise his profession; it is undertaken for the purpose of neutralising the effect of his departure from his place of business, for private purposes, on the previous evening. In other words, the object of the journeys, both morning and evening, is not to enable a man to do his work but to live away from it.’

In the Court of Appeal, Denning LJ said that, in such cases, you first have to identify the base from which the taxpayer carries on his trade or profession. To decide where the place of work is, in any particular case, requires you to examine the nature of the taxpayer’s activities and how they are organised.

Denning LJ then explained why the expenditure was not allowable. Essentially, this was because the journey was to allow the taxpayer to live away from his business base: his chambers. It did not matter that the barrister maintained a law library at home and, as a question of fact, worked at home. The purpose of the journey between home and chambers was to allow the barrister to live away from chambers, see page 464:

‘A distinction must be drawn between living expenses and business expenses. In order to decide into which category to put the cost of travelling, you must look to see what is the base from which the trade, profession, or occupation is carried on. In the case of a tradesman, the base of his trading operation is his shop. In the case of a barrister, it is his chambers. Once he gets to his chambers, the cost of travelling to the various courts is incurred wholly and exclusively for the purposes of his profession. But it is different with the cost of travelling from his home to his chambers and back. That is incurred because he lives at a distance from his base. It is incurred for the purposes of his living there and not for the purposes of his profession, or at any rate not wholly or exclusively; and this is so, whether he has a choice in the matter or not. It is a living expense as distinct from a business expense.

On this reasoning I have no doubt that the Commissioners were right in regard to Mr Newsom’s travelling expenses during term time. The only ground on which Mr Millard Tucker [taxpayer’s counsel] challenged their finding during term time was because Mr Newsom has a study at his home at Whipsnade completely equipped with law books and does a lot of work there. The Commissioners did not regard this as sufficient to make his home during term time a base from which he carried on his profession, and I agree with them. His base was his chambers in Lincoln’s Inn. His home was no more a base of operations than was the train by which he travelled to and fro. He worked at home just as he might work in the train, but it was not his base.’

Denning LJ’s analysis applies equally to any professional or trader who lives away from their business base and claims a deduction for the cost of travel. The fact that the taxpayer in such a case does some work at home does not make the cost of the journeys between home and their base allowable.

The cost of travelling between home and work includes the incidental costs of such a journey, including (for example) car parking and congestion charges. All such incidental costs are disallowable where the purpose (or one purpose) of the journey is to travel from home to place of work.

Where a taxpayer does the office work for their trade does not determine their place of work. A shopkeeper’s place of work is their shop because that is where the customers go to obtain the services the shopkeeper provides. The shopkeeper may do the office work at home but the costs of travel between home and the shop are not allowable. Those costs are incurred to enable the shopkeeper to live away from the shop and such expenses fail the ‘wholly and exclusively’ test in the legislation. The expenditure is not for the purpose of the trade, it is for the private purpose of living away from the shop.