Contractor’s home to hotel travel disallowed

A Scottish contractor, who lodged in Swindon to be available for work in the south of England, had his travel and accommodation expenses disallowed as not wholly and exclusively incurred for his business.

23rd Nov 2020

Taylor claimed the expenses between his home in Melrose, Scotland and a hotel in Swindon in his 2016/17 tax return.

HMRC opened an enquiry into Taylor’s 2016/17 return in April 2018 and requested a breakdown of Taylor’s expenses claims. In November 2018, HMRC issued a closure notice and a penalty notice for £1,015.96 and £1,115.35 respectively.

The closure notice disallowed much of the taxpayer’s expenses claims on the basis that they were not incurred wholly and exclusively for the purposes of his trade. The penalty was assessed based on careless behaviour.

Taylor appealed both the closure and penalty notices (TC07893).


During the 2016/17 year, Taylor chose Swindon to be his base to undertake work at various sites as there was better pay on offer. In other words, Taylor lived in Melrose but chose to carry out his trade primarily at sites around Swindon.

As he was required to work long days, Taylor decided that he needed local accommodation, and chose something basic. He did not claim his evening meals as an expense. In 2016/17, he stayed in Swindon for 165 nights.

Taylor took advice prior to claiming the expenses in his tax return and believed the wholly and exclusively test had been met. There was no dual purpose for the accommodation, as he had only been in Swindon for work.

Wholly and exclusively

Broadly, under ITTOIA 2005 s 34, when calculating trading profits no deduction is allowed for expenses not incurred wholly and exclusively for the purposes of the trade. As a result, this case turned on whether the accommodation and travel expenses were wholly and exclusively incurred by Taylor for the purposes of his trade.

Taylor asserted that his situation paralleled that of the successful appeal in Horton v Young (1971) 47 TC 60. In that case, the taxpayer worked as a subcontractor bricklayer at various building sites within 55 miles of his home, worked at each site for around three weeks, wrote up his books and kept his tools at home, and travelled to the sites in his car.

HMRC argued that in contrast to Horton v Young, Taylor worked out of Swindon, not his home address in Melrose. As such, the travel and accommodation between Melrose and Swindon was not wholly and exclusively incurred per ITTOIA 2005, s 34. In this case, Taylor had simply chosen Swindon as a convenient base for his work at different sites.


The FTT agreed with HMRC’s interpretation: the main reasons Taylor chose to stay in Swindon were to improve his chances of obtaining better rates of remuneration and to reduce the journey time from his home in Melrose to his place(s) of work. 

As the FTT put it, it was not as if Taylor was unable to live and work in Melrose. His situation was little different from a taxpayer choosing to stay in a hotel closer to their workplace during the week so that they could spend longer at home, eg to help with childcare or to catch a later train, and then claiming those hotel expenses against their income.

The FTT found the facts of Horton v Young to also markedly differ from the facts of this case. In Horton, the taxpayer worked within a 55 mile radius from his actual home, and did not base himself in lodgings nearer his various places of work for his own convenience and improved remuneration.

Accordingly, the FTT found that the accommodation and travel expenses claimed did not meet the wholly and exclusively test, and so were not deductible. HMRC’s closure notice was to stand.

Penalty reduced to nil

Notwithstanding the above, the FTT did find HMRC’s penalty evaluation to be flawed.

The FTT felt that Taylor had acted on an innocently mistaken understanding of section 34 and had taken advice that was not “disqualified” per FA 2007, Sch 24 para 3A(4). Accordingly, the FTT found that the penalty rate should be reduced to 0%. 

However, the reduction of the penalty to nil did not comfort the taxpayer, as HMRC had already suspended the penalty by the time the appeal was heard.


HMRC did concede that if the taxpayer had travelled to Swindon for a specific contract, then his travel and accommodation costs for that contract would have been deductible. However, this is not what happened in this case.

Further guidance from HMRC on the deductibility of travel expenses is available in the Employment Income Manual para 31800.

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