Samadian loses expenses case at Upper Tribunal

In a long-running case over the tax deductibility of expenses, a self-employed consultant has lost his case at the Upper Tribunal over expenses incurred for journeys between patients and private clinics and NHS hospitals.

Dr Samadian lost his appeal at the Upper Tribunal over tax deductible expenses, which will have implications for self-employed workers.

In the appeal, Samadian v Revenue and Customs Commissioners [2014] UKUT 0013 (TCC), the Upper Tribunal has upheld a First Tier Tribunal decision on travel expenses in Samadian [2013] TC 02533 ruling that the cost of journeys by a consultant between private clinics and NHS hospitals and between private clinics and his home were not incurred 'wholly and exclusively' for the purposes of his private practice and are therefore not deductible expenses.

Dr Samadian is a self-employed consultant who works full time as an NHS employee at two London hospitals and also looks after private patients as a self-employed consultant. He holds weekly out-patient appointments to assess his private patients at two private hospitals and prepares treatment plans for them at his home office, where he also carries out other administrative tasks.

Although the FTT accepted that Dr Samadian had a place of business at home necessary for his professional practice, they found that because of a 'pattern of regular and predictable attendance' at the two private hospitals these were also 'places of business'.

Dr Samadian appealed to the Upper Tribunal on several grounds, including that the FTT was wrong to characterise the private hospitals as places of business and to conclude that the travel between the NHS hospitals and the private hospitals is not deductible.

The Upper Tribunal dismissed all three grounds of appeal, finding the FTT's decision to be essentially correct.

To support the deicision and provide advice going forward, the Upper Tribunal provided a summary of categories for treating travel expenses as deductible or non-deductible, which in its view, would 'attract broad public acceptance':

Travel expenses are treated as deductible in relation to itinerant work (such as Dr Samadian's home visits to patients).

Travel expenses for journeys between places of business for purely business purposes are treated as deductible.

Travel expenses for journeys between home (even where the home is used as a place of business) and places of business are treated as non-deductible (other than in very exceptional circumstances, such as if Dr Samadian is at one of the private hospitals preparing to see a patient, he realises he needs his notes on the patient which are located in his office at home so he makes a special trip to go home to collect the notes, and immediately returns to the hospital to see the patient).

Travel expenses for journeys between a location which is not a place of business and a location which is a place of business are not deductible.

'This case highlights the difficulties faced by self-employed taxpayers in deciding which travel costs are deductible in computing their profits and which are not. Given the increasing numbers of people working both at home and at other places of work the decision is bad news for many taxpayers,' says Meg Wilson, tax specialist at Wolters Kluwer.

'We know from the Office of Tax Simplification's Review of employee benefits and expenses: interim report published in August 2013 that it is looking at changes to the travel and subsistence expense rules for employees because of significant changes to working patterns over the last 15 years.

'It would also appear to be a good opportunity to look at the rules applying to self-employed workers because they have seen similar changes to working patterns.'

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