PIM2220 - Deductions: main types of expense: travelling expenses
Fixed rate mileage allowance for unincorporated landlords
From 2017/18 unincorporated landlords can choose to use a fixed rate mileage deduction rather than deducting actual running costs and claiming capital allowances under sections 94C-94G of the Income Tax (Trading and Other Income) Act 2005.
The fixed rate mileage allowance will not be available if capital allowances have previously been claimed on the vehicle. However there will be transitional arrangements for property businesses who claimed capital allowances on vehicles 2013/14 -2016/17 and who wish to start using mileage rates from 2017/18.
The fixed rate mileage allowance will mirror that used in other business as outlined in BIM75005, with the exception of the transitional arrangement set out below.
The rates per business mile that can be claimed are:
| Vehicle | Flat rate business mile |
|---|---|
| Cars and goods vehicles first 10,000 miles | 45p |
| Cars and goods vehicles after 10,000 miles | 25p |
| Motorcycles | 24p |
The number of people in the vehicle does not affect the rates.
Transitional arrangements
Where a landlord has claimed capital allowances for a vehicle in tax years 2013/14 to 2015/16 and wishes to start using the mileage allowance from 6 April 2017, they may use the mileage allowance from that date, provided the first year of claim to capital allowances in respect of the vehicle was 2013/14 or later. The capital allowances unrelieved qualifying expenditure in respect of the vehicle will be extinguished at 5 April 2017 and no further unrelieved qualifying expenditure will be available to claim capital allowances.
Alternative travelling expenses deductions
Deductions for travelling expenses depend mainly on the 'wholly and exclusively' rule outlined at PIM2010.
Revenue costs of travelling between different properties solely for the purposes of the property business are an allowable deduction in computing property business profits. But the cost of travelling from home to the let property and back will only be allowable if the purpose in making the journey is exclusively a business one. 'Revenue' costs are running costs (such as fuel, road tax, bus fares) as opposed to the capital costs (the purchase price of a car or van for example).
Travelling expenses will not be deductible if the purpose in making the journey is partly private and, for example, includes a visit to the shops to buy weekly groceries. But a landlord can still have a deduction for a journey made solely for business purposes if any personal benefit they get is only incidental; for example, where they happen to stop on the way to pick up a newspaper.
The purpose in making a journey is a question of fact. The landlord's stated purpose is a relevant factor but it will not be decisive if they (or for example, their family or friends) actually gain a substantial private benefit.
Where the property business is administered from an office outside the landlord's home, the cost of journeys between home and either a property they let or that office will not be allowable. But the cost of travel from their business office to and from the properties, and between the properties, may be allowable provided, as always, it was incurred wholly and exclusively for business purposes.
The landlord may use a car or van partly for business and partly for private purposes. If so, they can split the running costs on a mileage basis and claim a deduction for those journeys undertaken wholly and exclusively for business purposes.
Capital expenditure on providing the means to travel (usually a car or van) isn't deductible in computing property business profits; nor is a depreciation charge. But plant and machinery capital allowances may be available. These allowances are deducted in computing the business profit or loss. The 'wholly and exclusively' rule applies to these allowances but, as with revenue expenditure, the landlord can claim the business proportion of the allowances. Plant and machinery allowances on cars costing more than £12,000 are also further restricted. For detailed guidance see PIM3010 onwards and the Capital Allowances manual.
Wholly and exclusively
The treatment of travelling expenses is similar to that for trades or professions. The crucial test is whether the expenses are incurred wholly and exclusively for the purposes of the property business.
Relevant case law
In Newsom v Robertson [1952] 33TC452 a barrister was found not to be carrying on his profession from his home. In consequence, travel between his home and his chambers was not wholly and exclusively for the purposes of his profession.
In Horton v Young [1971] 47TC60 it was found as a fact that the bricklayer in the case did carry on his trade from home. In consequence, travel from his home to the various sites at which he worked was undertaken for the purposes of the trade.
These cases are relevant to property businesses.
Is the business carried on at home?
It is a question of fact whether the customer carries on the property business at his home.
If there is some office outside the home from which the business is managed, then it is not being carried on at home, even if the customer sometimes 'brings work home'. (The barrister in Newsom v Robertson frequently did work at home, but it was still found that his place of business was his chambers.) If there is no office outside the home then it will normally be the case that the customer carries on the business there.
Use of a letting agent
Some landlords engage a letting agent to collect rents, organise services etc. Where a letting agent carries out all (or virtually all) the duties relating to the letting activity, it is likely that the property business is being conducted through the agent. In such circumstances, the business 'base' is likely to be the agent's office, and travelling expenses from the customer's home will not normally be allowable.
Need for careful scrutiny of claims
You may need to look carefully at the facts where there is a claim for travelling expenses between home and a let property some distance away. For example, a customer letting their house in Manchester while they work away from home in Brighton may have travelled to Manchester to visit friends and relatives as well as to see to the property. In that case, there would be duality of purposes and the expense would fall to be disallowed on 'wholly and exclusively' grounds.