This First Tier Tribunal case dealt with an appeal against the denial of tax relief for the travel expenses of an individual who had a series of temporary employment contracts for working at different company sites of his employer.

The Tribunal was required to examine if the travel was between temporary sites for which relief would be available or if it was to a permanent site which would mean it would be treated as ordinary commuting making the expenses not deductible.

Background

This case dealt with an appeal against discovery assessments for two tax years in addition to closure notices issued for a further two tax years. Mr Nowak had previously submitted self-assessment tax returns for each of the relevant tax years under appeal to claim what he considered to be expenses deductible from his employment income pursuant to sections 337–339 of the Income Tax (Employment and Pensions) Act (“ITEPA”) 2003. HMRC considered that the expenses were not properly deductible and issued the assessments and closure notices.

During each of the relevant tax years Mr Nowak lived in Pontefract, West Yorkshire and for at least part of each year worked for Weir Engineering Services Ltd (“Weir”). He was an “actuator technician” employed to work at various nuclear power stations throughout the country.

Mr Nowak was separately contracted by Weir to work at a specific power station and a number of letters of offers of temporary employment were in evidence. These showed the commencement date of each contract and the site the appellant was contracted to work at, although he did not always get a letter of offer of temporary employment for each site he worked at.

Under each contract the appellant worked weekends and would have one day off every two weeks, living in lodgings close to the particular site where he was working. At the end of each contract Weir would give him an estimated start date for his next contract. Weir paid Mr Nowak a casual lodging allowance which was not taxed at source. No lodging allowance was paid for his days off.

Weir also paid the appellant a mileage allowance for travel from home to and from each site at the start and end of each contract. Every second day off, Weir also paid a mileage allowance to travel home and back to the relevant site. It is not clear whether they also paid an allowance for travel between the appellant’s lodgings and the site. The mileage allowance paid by Weir was 23p/mile and it was not taxed at source.

Mr Nowak contended that he is entitled to claim a deduction for the difference between the mileage allowance paid by Weir and the 45p/mile being HMRC’s “approved amount” and he claimed this on the relevant self-assessments under appeal.

In certain circumstances, section 338 allows an employee to claim travel expenses for journeys direct from home or lodgings to a temporary place of work, but not in the case of ordinary commuting as defined in section 338(3). The issue in this appeal is whether the travel expenses claimed by the appellant relate to ordinary commuting.

Arguments and decision

Counsel for Mr Nowak contended that Weir was clearly treating the lodging and mileage allowances it paid to the appellant as non-taxable, which must have been because they did not involve commuting or travel from home to a permanent workplace.

It was also contended that at least four other employees of Weir who were in a similar position to the appellant had been the subject of HMRC enquiries and the outcome was that their claims for travel and subsistence expenditure had been allowed. However no information was available in relation to those individuals and thus the Tribunal was unable to take this into account for the purposes of this decision.

The appellant’s main case was that the sites should not be treated as permanent workplaces. Further, even if they were permanent workplaces, there were occasions where, during a contract, the appellant was required to work at different sites.

Counsel for HMRC contended that the treatment of payments made by Weir was irrelevant and that Mr Nowak is not entitled, as a matter of principle, to claim relief for expenditure on lodgings and travel expenses between home and site over and above what was paid by his employer.

HMRC’s main argument was that Mr Nowak’s travel expenses were expenses of ordinary commuting. In particular, they contended that the appellant worked at each site pursuant to separate contracts of employment. As such, each site was a permanent workplace within section 339 ITEPA 2003 at the time the appellant was working there and his travel from home or lodgings to that site was therefore ordinary commuting and no relief was available.

Even if that was not correct, the appellant failed to provide sufficient evidence to satisfy HMRC what expenditure has been incurred. No receipts have been provided and no contemporary records of mileage have been provided.

The Tribunal held that the way in which Weir treated payments for lodging and travel expenses as tax free did give pause for thought and suggested that Weir did not regard Mr Nowak as working at permanent workplaces. However the Tribunal found that direct evidence, to which more weight should be given, indicated that these were permanent workplaces.

The only evidence to suggest that each site was a temporary workplace is the fact that Weir paid lodging allowances and mileage allowances without deduction of tax. That was not sufficient on its own to satisfy the Tribunal that the sites were temporary workplaces. The Tribunal held that the evidence provided during the course of the hearing supported that the appellant was employed by Weir pursuant to a series of separate contracts of employment.

Each contract of employment required the appellant to work at a particular power station which, for the purposes of each employment, was a permanent workplace. In relation to each employment, the site was a place the appellant regularly attended in the performance of his duties for that employment. It was the base from which his duties were performed and the tasks to be carried out by the appellant were allocated there. As such, the appellant’s travel to and from each site was ordinary commuting within section 338 and the appellant is not entitled to a deduction for the travel expenses he claimed.

The appellant’s appeal was therefore dismissed in full.

The full judgment in this case is available from: - http://financeandtax.decisions.tribunals.gov.uk//judgmentfiles/j11268/TC07307.pdf