Nonsense and subsistence

If you want tax relief, don’t have friends.

That was my tongue-in-cheek reaction to the latest development in actor Tim Healy’s battle with HMRC over his subsistence expenses.

He was performing in a West End Show and arranged a short-term let of a flat, the cost of which was roughly equal to that of a hotel stay. He claimed the rental as a deduction against his income, but the taxman refused.

The First-tier Tribunal allowed Healy’s appeal, but the Upper Tribunal remitted the case to the lower tribunal on the basis the wrong legal test had been applied.

In the revised judgment, the First-tier Tribunal found the costs were not deductible, because Healy’s decision to rent was influenced by the fact that “he knew that he would need space for visiting family and friends… It was cheaper to host family and friends in a flat than in a hotel.”

That was fatal, because it showed the expenditure had a dual purpose. Had he gone back to a hotel room every night, the costs would have been allowable.

The decision cannot be faulted as a matter of law, but it does show that tax rules sometimes produce results that seem remote from common sense.

Healy needed to stay away from home and had to spend money to do so. Did the deductibility of the costs really have to depend on how he organised his accommodation?

Travel and subsistence has always been a difficult area of the law. Perhaps it is time for another look at whether the rules are fit for purpose.

Agent and client

Read the updated guidance on agent and client authorisation. It is nothing particularly new, but it brings a lot of useful information together. Of course, in a few years’ time, the digital strategy will allow this all to be done with a few clicks of a mouse.