Landlords May Lose Right To Reclaim Travel Expenses

In a business mileage claims case that has taken seven years to resolve, the Judges finally ruled in favour of the taxman, with potentially huge implications that could affect landlords as well as others who work from home.

It was ruled at the First-Tier Tribunal that a doctor’s mileage claims between his home office and the hospital where he worked were not allowable business expenses. Although Dr Samadian had shown he had a dedicated home office, the Judges found in favour of HM Revenue and Customs because they did not accept this home office as starting place for working out private practice business mileage. HMRC argued that return journeys from the hospital back to his home office could not be claimed solely as a business expense because, whether or not he returned to work in his office, Dr Samadian would be travelling home.

The travel between home office and hospital would therefore be regarded as commuting, which is not an allowable business expense that can be reclaimed. For landlords this could mean no longer being able to claim round-trips from home to a buy-to-let property.

The hearings started in 2006 when the taxman opened an enquiry into the claims, and have passed through three tribunals along the seven-year process.

Dr Samadian, a geriatrician, worked full-time for several hospitals and held outpatient sessions at two private hospitals. Additionally, he had a home office for administration, which patients did not attend. On his self-assessment return he submitted weekly journeys between the private hospitals and the NHS as well as from his home to the private hospitals to support a 65% business mileage and capital allowance expense claim.

HMRC and Dr Samadian did not see eye to eye on this, finding themselves unable to agree a claim, so the issue was brought before a tribunal. HMRC set forth the argument that since the trips from the home office could not be treated as being wholly and exclusively for business purposes the claim could not be accepted. This turned out to be a winning argument.

Unfortunate for Dr Samadian, but also for anyone who runs a business from a home office if it requires them to work also in other locations. Landlords are one group that could be affected, as it is currently possible for them to reclaim mileage from their homes to rental properties for the purpose of things like showing prospective tenants the property or allowing access to workmen. Landlords with rental properties a long way from where they live, or even overseas, could find themselves facing great expense.

Word on the grapevine is that the decision will be appealed? Watch this space!

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