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Self Employed Record Keeping App – The case of Tim Healy

Actor Tim Healy has just lost the battle for tax relief for accommodation costs.  The case was originally heard in 2012, when the actor won a partial victory against H M Revenue & Customs.  Tim, who is based in Cheshire, had appeared in the West End musical Billy Elliott between December 2004 and December 2005.

 He had claimed relief for £32,503 in respect of  accommodation expenses as it was recognised that the purpose of renting the property was to facilitate his work.  The tribunal held that the expenses were “wholly and exclusively “ for the business and therefore tax deductible.  The case was pivotal because there had previously been very little case law on what an actor could claim.

He failed though to prove expenses on subsistence of £4,094 and taxi fares of £4,080 fell within the same remit and he lost the claims on those.  Interestingly, he could have been successful in his claim for travel expenses, had he kept an itemised record of his usage.  Judge Barbara King who presided over the first tier tribunal case,  was unconvinced that all the taxi journeys were for the purpose of his work.

HMRC appealed the case on the basis that first tier tribunal had misinterpreted the law and not applied the correct tests.  The appeal was heard in 2014 and the decision has now been announced  To be successful, the actor would need to prove that the expense was “wholly and exclusively” for the business.  If an expense is incurred for more than one purpose, then relief will still be given provided the part of the expense which is wholly and exclusively for the business can be identified.  Motor expenses are a typical example of where there can be a duality of purpose.  It is easy to divide the expenses by reference to business miles.

The tribunal has now held in favour of the H M Revenue and Customs and disallowed the accommodation expenses.  The expenses were incurred on the rental of a flat and the actor confirmed in his oral evidence at the hearing that the flat had three bedrooms to allow for friends and family to visit.  There was therefore a duality of purpose and the tribunal considered whether it was possible to apportion the expense.  It had been suggested that apportionment could be in the term of the number of rooms or floor space. However, the tribunal rejected this idea because Mr Healey’s guests would be using other rooms in the flat as well.

This case is highly significant for any other self-employed taxpayers who stay away from home on business.  It is clear from the comments made during the case that the rules will be looked at on a case by case basis and accommodation costs may well be allowable.  It has also emphasised the importance of keeping good records to be able to claim for travel expenses.  Interestingly, we do have an app available for the phone which enables you to scan the receipts whilst you are on the move.

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