BIM37630 - Wholly and exclusively: duality of, or non-trade, purpose: travel costs: home to work by way of a supplier

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

Dentist visiting dental lab on journeys to and from home

Visiting a supplier on a ‘home to office’ journey does not convert an otherwise non-allowable expense into an allowable deduction. Such travel, if not exclusively, is in part for the purpose of travelling from home to work. This duality means that the expenditure is not allowable.

In Sargent v Barnes [1978] 52 TC 335, a dentist claimed a deduction for the motor expenses he incurred in travelling from his dental surgery in Winchcombe, to his home 12 miles away at Badgeworth, near Cheltenham. On the journey each morning and evening he made a slight detour to visit the laboratory, which he maintained in Cheltenham, for the repair, alteration and manufacture of dentures. It was not disputed that the laboratory was a proper adjunct of the practice or that the work done there was exclusively referable to the practice. The laboratory was about one mile from the taxpayer's home.

The taxpayer contended that this expenditure (which the Inspector would not allow) was deductible in computing his profits because he had two bases of operations: the laboratory and the surgery. His professional activities commenced each day at the laboratory and each evening terminated there.

The Commissioners allowed the claim on the basis that it was ‘necessary’ for the taxpayer to incur this expense.

The High Court overturned the Commissioners and found that the whole of the expenditure was inadmissible. Oliver J said that:

1. the Commissioners applied the wrong test in deciding that the expenditure was ‘necessary’ as that was no guide to whether it was exclusively for the purposes of a trade
2. on the facts found, it would be a travesty to say that the taxpayer was carrying on his practice at the laboratory
3. the expenditure was incurred, if not exclusively, then at least in part, for the purpose of enabling the taxpayer to get from his private residence to the surgery where his profession was carried on and the fact that he was enabled to stop at the laboratory to carry out an activity exclusively referable to his profession did not convert the dual purpose into a single purpose

Oliver J expressed doubt as to the utility of examples and analogies in reaching the correct conclusion saying, on page 341:

The Statute here lays down a test in express terms, and although analogies and examples may be useful guides the propounding of general propositions which involve the use of analogous, but not precisely equivalent, terms can lead to confusion. In the ultimate analysis, the Court has simply to look at the facts of the case before it and apply to those facts the statutory formula.

Oliver J did not accept that a taxpayer could convert what was an essentially private journey, travel from home to place of work, into a trade journey by the device of stopping off en route to drop off, pick up and discuss dentures, saying onpage 343:

But the interruption of a journey, whether for five minutes or for a longer period, does not alter the quality of the journey, although it may add to its utility. At highest, as it seems to me, it merely furnishes an additional purpose.

After reviewing the decisions in Horton v Young [1971] 47 TC 60 (see BIM37620), Newsom v Robertson [1952] 33 TC 452 (see BIM37605), Bentleys Stokes & Lowless v Beeson [1952] 33 TC 491 (see BIM37400) and Bowden v Russell & Russell [1965] 42 TC 301 (see BIM37610), Oliver J summarised the reasons for disallowance. The insertion of a stop-over in what was otherwise a journey for the purpose of getting to or from the place where the taxpayer chose to live did not make the whole or part of that journey into a business journey, see page 344:

In the instant case, on the facts found it would in my judgement be a travesty to say that the taxpayer was in any relevant sense carrying on his practice as a dentist at The Reddings [the laboratory]. He had established a facility at The Reddings, and he was merely utilising his journey between his residence and the base of operations where the practice was carried on to avail himself of this facility; that is to say, to visit this intermediate point, where he had arranged for an independent contractor to carry out an activity - no doubt a necessary activity - referable to the practice. But the journey did not thus assume a different purpose once the intermediate point was passed, or cease to be a journey for the purpose of getting to or from the place where the taxpayer chose to live. I do not therefore think that, however necessary to the practice the activity pursued at The Reddings may have been, the Commissioners could properly have arrived at the conclusion that the expenses claimed were incurred solely or exclusively for the purposes of the practice; and the appeal therefore succeeds.