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Business Income Manual

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Wholly and exclusively: duality of, or non-trade, purpose: travel costs: to and between sites

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

Where relevant - establish the base of operations

Where an ‘itinerant’ trader’s base of operations is at their residence, you should allow the costs of travelling between the residence and the sites at which the trader works. An itinerant trader is one travels from their home to a number of different locations for the purely temporary purpose at each such place of there completing a job of work, at the conclusion of which they attend at a different location. A typical example would be a jobbing builder.

In the case of Horton v Young [1971] 47 TC 60, Mr Horton carried on business as a bricklayer. He:

  • entered into contracts with a main contractor for bricklaying at various building sites within 55 miles from his home
  • worked on each site for three weeks or so
  • had no office on the sites
  • contracted for work, wrote up his books and kept his tools at home, and
  • travelled to the sites in his car, in which he conveyed the other members of his bricklaying team

The taxpayer attributed one-third of his travelling expenses to travelling between sites, and the balance to travelling to and from his home.

Mr Horton claimed (amongst other matters) a deduction in respect of the expenses of travelling between his home and the sites. He contended that his home was his place of business. The Crown argued that the expenses were not wholly and exclusively for the purposes of Mr Horton’s trade.

The General Commissioners held that the expenses of travelling between Mr Horton’s home and building sites were not an allowable deduction.

Brightman J elaborated on the variety of possible places of business that a self-employed taxpayer may have. The judge considered that there was a fundamental difference between a self-employed person who travels from his home to his shop or his office or his chambers or his consulting rooms and a self-employed person who travels from his home to a number of different locations for a purely temporary purpose. The judge went on to say that he did not think it mattered if the taxpayer in the latter category conducted any trade or professional activities at their home. The essential point was that the nature of their trade or profession was itinerant.

Brightman J however placed qualitative limits on the distance that an itinerant taxpayer could live from the location at which they normally carry on their trade for the costs to be allowable. The Judge cited the example of a commercial traveller living in London but whose ‘patch’ was Cornwall. The cost of travel between London and Cornwall would not be allowable even if the person had a ‘travelling occupation’.

The part of Brightman J’s judgment on which the above guidance is based is set out below, starting at page 68:

`In the majority of cases a self-employed person has what can properly be described as his place of business or base of operations. In the case of the medical practitioner, it is his surgery or his consulting rooms; in the case of the shopkeeper it is his shop; in the case of the barrister it is his chambers, and so on. There are, however, some occupations in which the self-employed person does not have any location which can readily be described as his place of business, but rather a number of places at which from time to time he exercises his trade or profession. It seems to me that there is a fundamental difference between a self-employed person who travels from his home to his shop or his office or his chambers or his consulting rooms in order to earn profits in the exercise of his trade or profession and a self-employed person who travels from his home to a number of different locations for the purely temporary purpose at each such place of there completing a job of work, at the conclusion of which he attends at a different location. I do not think it matters in the latter type of case whether the taxpayer does or does not effectively carry on any trade or professional activities in his own home. The point is that his trade or profession is by its very nature itinerant. When the chimney sweep leaves his home in the morning and goes from house to house with the aid of his car or van, it appears to me unrealistic to deny that he incurs all such travelling expenses wholly and exclusively for the purposes of his trade. There must be plenty of other self-employed persons whose jobs are similarly itinerant. The test cannot be whether the job keeps the taxpayer at a particular location for perhaps two hours, as in the case of the chimney sweep, or three weeks, as in the case of Mr. Horton.

In my view, where a person has no fixed place or places at which he carries on his trade or profession but moves continually from one place to another, at each of which he consecutively exercises his trade or profession on a purely temporary basis and then departs, his trade or profession being in that sense of an itinerant nature, the travelling expenses of that person between his home and the places where from time to time he happens to be exercising his trade or profession will normally be, and are in the case before me, wholly and exclusively laid out or expended for the purposes of that trade or profession. I have used the adverb “normally” because every case must to some extent depend on its own facts. Also, I do not wish to prejudge a case where the occupation is itinerant within a certain area but the taxpayer’s home is outside that area. The example given in argument was a commercial traveller who has a home in London but whose operational area is confined to Cornwall. I can quite see that in such a case the cost of travelling between London and the borders of the Duchy would not be moneys wholly and exclusively laid out or expended for the purposes of that commercial traveller’s business. In the case before me the taxpayer had his home in Eastbourne and carried on his trade within and outside the Eastbourne area.’

The ‘base of operations’ test derives from Denning LJ’s judgment in the Court of Appeal in Newsom v Robertson [1952] 33 TC 452 (see BIM37605). In a case concerning a milkman, Powell v Jackman [2004] 76 TC 87 (see BIM37635), Lewison J cautioned against applying this test outside the narrow confines of its utility.