self assessment nightmare

hariboh

At the beginning of January my husband who is a self employed sub contractor in the construction industy received a letter from HMRC saying that we had to submit all receipt for 2008-2009.

We sent the receipt away and received a letter back today.

My husband works away fromn home as a joiner is usually home every second weekend he stays in hotels.... the letter is as follows..

There is a question of what is allowable in the accounts in terms of accomodation and subsistence.

ACCOMMODATION

Briefly, travel from a subcontractors businees base or home on a daily basis to 2 or more sites within the daily travel is an allowable expense.

However when i trader travels to take up an engagement and stays in the vicinity he is travelling to set up a temporary base, travel to such a base and the costs of maintaining that base are not a business expense, they are costs of puting the taxpayer in a position to trade rather than costs incurred in that trade. The authority for this is contained in judgements in various tax law cases - Horton V Young, Prior v Saunders, Newson V robertson.

In view of this it is my intention to disallow the costs claimed for accommodation of £2900

SUBSISTENCE

WHEN A BUSINESS TRIP NECESSITATES ONE OR MORE NIGHT AWAY FROM HOME, THE ACCOMODATION AND REASONABLE COSTS OF OVERNIGHT SUBSISTENCE ARE DEDUCTABLE. THIS DOES NOT EXTEND TO OVERNIGHT ACCOMODATION AND SUBSISTENCE AT THE BASE OF OPERATIONS EVEN IF THERE IS A CONTRACTUAL REQUIREMENT FOR YOU TO RESIDE IN A PARTICULAR PLACE. AS MENTIONED ABOVE THE PREMISES, WHERE YOU CARRIED OUT YOUR WORK ARE THE BASE OF OPERATIONS. I THEREFORE INTEND TO DISALLOW THE SUBSISTENCE COSTS OF £2000.

HOWEVER, I REALISE THAT YOU MAY WELL HAVE TO VISIT VARIOUS SITES TO PRICE WORK AND WILL ALLOW £800 TO COVER THESE COSTS.

...... so according to the calculation we owe them £1100

but im soooo confused because our local tax office checked the previous 2 years before submitting them and said we could claim the hotel.

To be honest if we didnt get the relief on the hotels at the end of the financial year it really wouldnt be worth him travelling as far to work which would mean that his business would fail

Pennywise

Does he always work at the same location, i.e. the same town, day in day out, week in week out, etc?

Or does he spend a month in town A, then the next month in town B, then the next month in town C, etc.

Does he do any self employed work at all based around your home area?

HMRC are right in saying travel/subsistence/accommodation between home and a permanent base isn't allowable. So you have to try to demonstrate that his home is his "base" but to do that, you have to show that he really does "work from home", and to do so, you need to demonstrate that he does his work at multiple locations and not just one, and to do that, you need to show he also has local work and/or goes to different locations away, one after the other, rather than going to the same place all the time.

By the way, the fact that HMRC staff "helped" you complete the form is irrelevant - they're not there to query what you're claiming for - their job is just to help you put the figures on the return.

hariboh

Hi thanks for the reply.

The year 2008-2009 he worked away and stayed overnight in hotels for 136 nights at all different locations from Derby to Bognor Regis to St Andrews.

He also had contracts in out home town which there were obviously no hotel or infact mileage for as he walked to work most days.

chrismac1

This is the relevant part of the HMRC manual on which the inspector is drawing his or her conculsion. Note:

1. A jobbing builder or similar tradesperson will "normally" be fine to claim home to place of work travel.

2. This means that something about your husband's pattern of travel must be "abnormal" in order for the expenses to be disallowed.

We could do with knowing the number of different overnight stay contracts during the tax year, and whether your husband's pattern of work in any way resembled the pattern in Horton v Young, the case the inspector is drawing on.

There have been a lot of cases in this area of tax law. This means that many situations are not black and white, or they would not get to Tribunals and Courts.

John_Pierpoint

hariboh wrote: »

Hi thanks for the reply.


He also had contracts in out home town which there were obviously no hotel or infact mileage for as he walked to work most days.

Go to the customer on a push bike and claim 20p per mile?

taxing

hariboh wrote: »

At the beginning of January my husband who is a self employed sub contractor in the construction industy received a letter from HMRC saying that we had to submit all receipt for 2008-2009.

We sent the receipt away and received a letter back today.

My husband works away fromn home as a joiner is usually home every second weekend he stays in hotels.... the letter is as follows..

There is a question of what is allowable in the accounts in terms of accomodation and subsistence.

ACCOMMODATION

Briefly, travel from a subcontractors businees base or home on a daily basis to 2 or more sites within the daily travel is an allowable expense.

However when i trader travels to take up an engagement and stays in the vicinity he is travelling to set up a temporary base, travel to such a base and the costs of maintaining that base are not a business expense, they are costs of puting the taxpayer in a position to trade rather than costs incurred in that trade. The authority for this is contained in judgements in various tax law cases - Horton V Young, Prior v Saunders, Newson V robertson.

In view of this it is my intention to disallow the costs claimed for accommodation of £2900

SUBSISTENCE

WHEN A BUSINESS TRIP NECESSITATES ONE OR MORE NIGHT AWAY FROM HOME, THE ACCOMODATION AND REASONABLE COSTS OF OVERNIGHT SUBSISTENCE ARE DEDUCTABLE. THIS DOES NOT EXTEND TO OVERNIGHT ACCOMODATION AND SUBSISTENCE AT THE BASE OF OPERATIONS EVEN IF THERE IS A CONTRACTUAL REQUIREMENT FOR YOU TO RESIDE IN A PARTICULAR PLACE. AS MENTIONED ABOVE THE PREMISES, WHERE YOU CARRIED OUT YOUR WORK ARE THE BASE OF OPERATIONS. I THEREFORE INTEND TO DISALLOW THE SUBSISTENCE COSTS OF £2000.

HOWEVER, I REALISE THAT YOU MAY WELL HAVE TO VISIT VARIOUS SITES TO PRICE WORK AND WILL ALLOW £800 TO COVER THESE COSTS.

...... so according to the calculation we owe them £1100

but im soooo confused because our local tax office checked the previous 2 years before submitting them and said we could claim the hotel.

To be honest if we didnt get the relief on the hotels at the end of the financial year it really wouldnt be worth him travelling as far to work which would mean that his business would fail

A good example of why not to go up against HMRC unrepresented, I'm afraid.

It seems to be that this 'officer' has contradicted his/herself:
AS MENTIONED ABOVE THE PREMISES, WHERE YOU CARRIED OUT YOUR WORK ARE THE BASE OF OPERATIONS directly followed by..
HOWEVER, I REALISE THAT YOU MAY WELL HAVE TO VISIT VARIOUS SITES TO PRICE WORK AND WILL ALLOW £800 TO COVER THESE COSTS.

By saying that he/she accepts that travel to the site for pricing is allowable, that is accepting then that the place you travelled FROM to make that visit MUST be your central work base. That is, your home/home office.

Your business is not just about being a site based worker: you are a business man with books & records to maintain and a centre of operations, where equipment (that includes admin equpiment as well as tools etc) is located and in use. While on site no doubt you are taking calls from other clients; making arrangements about buying stock/materials etc for next project, arranging to call back to tweak previous jobs...and so on....

Don't take it lying down...fight back...HMRC are wrong but you need to make a case against them.

It may be worth a visit to an accountant as this will impact on your tax going forward unless you get it properly resolved now.

Good Luck.

hariboh

We could do with knowing the number of different overnight stay contracts during the tax year, and whether your husband's pattern of work in any way resembled the pattern in Horton v Young, the case the inspector is drawing on.[/QUOTE]

7/4 - 18/4 = Derby (staying in hotel) 11 nights
20/4 - 25/4 = work in hometown no travel required
28/4 - 2/5 = Edinburgh (travelling daily)
5/5 - 9/5 = Edinburgh (travelling daily)
26/5 - 30/5 = Edinburgh (travelling daily)
3/6 - 13/6 = Weston-super-mare (staying in hotel) 10 nights
16/6 - 26/6 = Bristol (staying in hotel) 10 nights
30/6 - 10/7 = Bristol (staying in hotel) 11 nights
11/7 - 30/7 = Hometown pricing jobs
31/7 - 6/8 = Bristol (staying in hotel) 7 nights
8/8 - 18/8 = Bristol (staying in hotel) 11 nights
18/8 - 21/8 = Bristol (staying in hotel) 4 nights
24/8 - 30/8 = Bristol (staying in hotel) 7 nightsw
1/9 - 8/9 = Bristol (staying in hotel) 8 nights
9/9 - 4/10 = Hometown pricing jobs
5/10 - 10/10 = Dundee (staying in hotel) 6 nights
12/10 - 10/11 = Working in hometown no travel needed
11/11 - 18/1 = Hometown pricing jobs
19/1 - 25/1 = Bognor Regis (staying in hotel) 7 nights
3/2 - 7/2 = Beeston (staying in hotel) 5 nights
8/2 - 13/2 = Hometown pricing jobs
14/2 - 19/2 = Beeston (staying in hotel) 5 nights
20/2 - 22/12 = Stafford (staying in hotel) 2 nights
23/2 - 4/3 = Bognor Regis (staying in hotel) 13 nights
6/3 - 12/3 = Beeston (staying in hotel) 7 nights
14/3 - 24/3 = Nottingham (staying in hotel) 10 nights
26/3 - 1/4 = Nottingham (staying in hotel) 7 nights

We have receipts for all the above hotel stays

John_Pierpoint

I am not any sort of tax accountant but this might help:
http://www.accountingweb.co.uk/item/171699
http://www.hmrc.gov.uk/manuals/bimmanual/bim37620.htm

You will note that several more links radiate out from the above HMRC link, but none of them appear to cover the person who changes "their place of business" many times per year - does your husband travel by van? - I have seen it argued in a totally different context that such a person's place of business is the doors of his van.

[As a mere member of the public this looks like yet another example of "mission creep" at HMRC - my swift Google suggests that your husband's peripatetic life style is very similar to that of a bricklayer. Perhaps there is an internal memo requiring "inspectors" to meet a target for clamping down on travel expenses ?]

Does your self employed husband pay you for managing his "Sales and Administration office"?
That might help demonstrate that he does not move his place of business (where he has to keep all the bumph we are required to maintain to be allowed to make a living) at least eight times a year - OK I know that the American branch of Hanson Plc was run from a hotel suite but this is rediculous]

chrismac1

I may well be clobbered for this by other posters from here, but... if I was your accountant I would assume that this HMRC guy was trying it on and that his or her case would in the end collapse even if we had to get to a Tribunal to show it was pretty ridiculous - and some really daft cases get to the Tribunals because it is your money they are spending and not their own. This has to be seen in the context of a major drive to squeeze a lot of extra tax out of small businesses - whilst of course at the same time letting Vodafone PLC off the odd £5bn in tax. In other words, go after the little guy and gal who don't usually have access to proper representation as they are an easy hit.

You may need to hire someone decent to fight this one. If your husband is in any trade bodies or pays any subscriptions to such, see if there is any cover within that for something called "fee protection insurance", "tax enquiry insurance" "tax investigation insurance" or similar. Firstly, though, is the inspector aware of the number of different contracts and the different locations? Because no doubt your husband's claimed costs for accommodation are well above the average in this sector and this has given rise to the assessment - but they look legitimate trading costs to me, wholly and exclusively incurred in the course of his trade.

hariboh

John_Pierpoint wrote: »

does your husband travel by van? - I have seen it argued in a totally different context that such a person's place of business is the doors of his van.

Does your self employed husband pay you for managing his "Sales and Administration office"?
That might help demonstrate that he does not move his place of business (where he has to keep all the bumph we are required to maintain to be allowed to make a living) at least eight times a year - OK I know that the American branch of Hanson Plc was run from a hotel suite but this is rediculous]

He travels by car, i do all the admin side from the house but he doesnt pay me.

When asked to send in receipts we were asked for all travel receipts and all receipts regarding the portion of the house we use as an office...... the tax inspector has allowed the mileage (about 12000 miles) and all the costs for the office but dissallowed the hotels and meals? i would have thought if he saying he had set up temp business at the hotels he would have queried the mileage and office costs?

Or am i away on a different route lol

sunshinetours

The bigger issue here is not just the 2008/09 year they are looking at but if they do agree a settlement with you, they will undoubedly look to go back several years "assuming" that this has happened each previous year and ask you to prove otherwise.

So for example, £1100 in one year becomes 6 x £1100 plus penalties for incorrect returns plus interest

That is why some are correctly suggesting this should be fought strongly and if you are not cionfident doing this yourself then do seek a good local accountant (preferably by recommendation) as soon as possible

Good luck