PIM2210 - Deductions: specific items: travelling expenses

Overview

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 rental business are an allowable deduction in computing rental 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 etc) 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 their family, friends etc) actually gain a substantial private benefit.

Where the rental 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 rental 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 PIM3000 onwards and the Capital Allowances manual.

Statute

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 rental 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 now relevant to rental businesses.

Is the business carried on at home?

It is a question of fact whether the taxpayer carries on the rental 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 taxpayer 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 taxpayer 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 rental 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 taxpayer'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 taxpayer letting his house in Manchester while he works 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. An Inspector should deal with any case where the admissibility of travelling expenses is in doubt.

Further guidance

For detailed guidance on the deduction of travelling expenses see BIM37600 onwards.