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HMRC internal manual

Business Income Manual

Wholly and exclusively: duality of, or non-trade, purpose: non-travel topics: accommodation and subsistence: sub-contractors

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

What to do in practice

In order to determine what travelling and subsistence expenses are allowable it can be useful in some cases to establish where the business is carried on (see Horton v Young [1971] 47 TC 60 and BIM37620). Although establishing the business base is not a necessity in applying the ‘wholly and exclusively’ test (see Powell v Jackman [2004] 76 TC 87 and BIM37635).

Normally, the cost of travel between the business base and other places where work is carried out is an allowable expense while the cost of travel between the taxpayer’s home and the business base is not allowable. Carrying on significant business activities at home does not mean that travel between home and another place where the business is conducted is thereby allowable (see Newsom v Robertson [1952] 33 TC 452 and BIM37605).

What is the business base is a matter of fact to be established in the individual case.

Separate business premises

Where the taxpayer owns or rents separate business premises away from their residence there is normally little doubt that these are the base of the business.

No separate business premises

There are some types of business where the taxpayer has no separate business premises away from home. For example, a doctor whose only office is a surgery attached to his home or an accountant whose only office is at his residence. In these cases, the doctor’s costs in travelling to visit patients and the accountant’s costs incurred in visiting clients are both clearly allowable. Similarly an insurance agent who has no office away from their residence but who visits clients would also incur allowable travelling expenditure.

In the cases above, the taxpayer would normally visit a large number of different premises to carry on the business. The position is rather different where a subcontractor works at one or a very small number of different sites during the year. In such a case it may be that the premises where the taxpayer carries on the business are, in fact, the business base. If this is so, the cost of travelling between the taxpayer’s home and the business base should be disallowed.

Following the decision in Horton v Young [1971] 47 TC 60 (see BIM37620), where a subcontractor works at two or more different sites during a year travelling expenses between the taxpayer’s home and those sites should normally be allowed.

However, where the subcontractor works at a single site in the year and this is the normal pattern for the business, travelling expenditure between the subcontractor’s home and the single site should only be allowed if the home is, in some real sense, the centre or base of the business. That will depend on the facts of the case and specifically what business activities are carried out at home.

Where the subcontractor provides services to one principal and for this purpose travels regularly at their own expense to one place from which the subcontractor is conveyed at the principal’s expense to other locations, the subcontractor should, as regards that principal, be considered to have one working place.

Similarly drivers who at the start of each day go, at their own expense, to a garage or depot to collect their vehicle which is returned to the same garage or depot at the end of the day should be considered as having one working place.

Accommodation and subsistence

Caillebotte v Quinn [1975] 50 TC 222 (see BIM37660) is the authority for disallowing the cost of a subcontractor’s lunches where there is a regular work pattern involving travel to different sites within a narrow radius of the subcontractor’s home.

Where such costs are not deductible there can be no apportionment of the expenditure to allow the additional expense of lunching away from home. The treatment outlined above applies even though the ‘business base’ is at the home address.

In Prior v Saunders [1993] 66 TC 210 (see BIM37665), the subsistence costs of a subcontractor whose work was carried out for several years in an area of the country away from ‘his home base’ were disallowed following the same principles.

However, if the subcontractor is obliged to incur the costs of overnight subsistence when working away from the business base, you should not object to reasonable expenditure on accommodation and subsistence. The reasonable cost of a meal should be allowed whether it is taken at the accommodation or within the vicinity of the accommodation.

For general guidance on subsistence costs and meals associated with overnight stay away from home for business purposes see BIM37670.