All About Travel And Subsistence

Typically, contractors seek to reduce tax obligations thus increase take home pay. One of the target areas for a long time in this business filed has been on travel expenses. Contractors argue on the basis that the business is a separate entity thus any accrued expenses on travels relating to business activities should be exempted form tax. Besides, contractors also explore tax relief on subsistence expenses.

Over the years, tax relief on subsistence expenses and business travels has attracted reactions from different stakeholders in the industry. The debate has led to significant policy formulations concerning key players in the industry such as umbrella company net. However, the court ruled on the matter giving specific direction on what qualifies for tax relief and what is liable for taxation.

The areas of concerns highlighted by contractors were solved on basis of the following information:

Healy V HMRC

Tim Healy as a popular actor had a case against the HMRC. He had a home in Cheshire where he would go every other weekend after working in London. During the week, he was staying at an apartment near the theater where he claimed compensation for the rental expense. According to Healy, he was an itinerary worker because he commuted between UK and the city in abroad for work. As a result, he demanded tax relief for his travels. However, the court only allowed claim on his rent but not on travels. The judgment was based on investigation stating that he had rented a 3 bed roomed house for purpose of accommodating visiting friends and family. According to the court, the expenses were not apportioned and not incidental hence not claimable.

Wholly and Exclusively Test

According to the Income Tax (Trading and other income) Act 2005, expenses not incurred wholly and exclusively for the purpose of trade are not viable for tax relief. Evidently, if the expenses are being used for any other purpose other than trade and business operations, the expense does not qualify for tax relief.

Samadian v CRC

Dr Samadian worked at two different hospitals. He worked for NHS hospitals, a private hospital, and also completed administrative related work at an office in his house. The case was based on these three locations to determine if tax relief and claiming is viable. According to the HMRC, fare from his home to the private hospital as well as to NHS hospital was claimable. However, his home office did not qualify for tax relief considering it was only one of many other spots that he used to work. The fact that he did not attend to patients at his home disqualifies it for tax relief.

Subsistence Costs

Regulations on relief of these expenses are only allowed if the relating travel costs are claimable. Tax relief can also be allowed if the travel is not part of a regular pattern of the trader.