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What are readers' views on the allowability or otherwise for tax of subsistence claims made by barristers? We act for a number of barristers who always include in their expenses subsistence claims of a few pounds per day for lunches when attending court. Sometimes these court attendances are away from their home town. Sometimes the claims are, say, £25 per week every week.
What are readers' views on the allowability or otherwise for tax of subsistence claims made by barristers? We act for a number of barristers who always include in their expenses subsistence claims of a few pounds per day for lunches when attending court. Sometimes these court attendances are away from their home town. Sometimes the claims are, say, £25 per week every week.
Our view has been that the claims are not tax allowable. It seems to us that, especially with barristers, it is important not to make any inappropriate claims for expenses. However, our views are being questioned by one or two of our clients, who tell us that other firms of accountants do not add back the subsistence claims.
We would be glad to know what the general consensus of opinion is.
(Query T15,807) – Toast.
'Toast' should be aware that to my knowledge many members of the bar have been or are the subject of enquiries. The main aspect is the treatment of chambers expenses and these are being considered on a national basis. I speak from first hand experience as a practising barrister. In addition to chambers expenses, the enquiries also tend to cover a number of other matters, in particular working wives and motoring expenses.
As far as subsistence is concerned, the legal basis is clear in principle if not in practice. The expense is only deductible if it is incurred wholly and exclusively for the purposes of the profession. (See section 74(1)(a) (b), Taxes Act 1988 and Mallalieu v Drummond [1983] STC 665 where the cost of sober court clothing for a barrister was disallowed.) It would seem to me that everyone has to eat just as everyone, certainly in court, has to wear clothes. Why should it cost more to eat at court or away from chambers than it does in chambers? In any event the dual-purpose rule would prevent the cost of lunches from being deducted. The point was specifically considered and decided in favour of the Revenue in Caillebotte v Quinn [1975] STC 265 where a carpenter worked from home and the additional cost of lunches when working on site was disallowed.
As a matter of practice, however, I am aware of colleagues who have agreed with the Inspector a deduction for the cost of lunches when at court away from their home town or city. From what I am told, this has been limited to the lunchtime subsistence payment of approximately £4.50 per day payable to Inland Revenue staff. The position in practice seems to mirror the treatment of subsistence allowances paid to employees. – Jonathan Cannan.
In Caillebotte v Quinn [1975] STC 265, the then Mr Justice Templeman opened his judgment with the following trenchant view: 'The question is whether a businessman who pays for his own lunch spends the money exclusively for the purposes of his business: the answer in the present case is No'. The Inland Revenue's Inspector's Manual at paragraph IM 860 makes the same point: 'The cost of meals taken away from the place of business is not in general an expense incurred wholly and exclusively for business purposes, since everyone must eat in order to live. Where such costs are disallowable they may not be apportioned to allow extra costs incurred from the necessity of lunching away from home or the place of business'.
However, that is not the end of the story. Employees (such as Tax Inspectors) are allowed the costs of subsistence in certain circumstances, under a slightly different test – they are treated as 'expenses necessarily incurred in travelling', and are therefore not subject in the same way to the 'wholly and exclusively' test. In 1976 (a year after Quinn's case), a question was put to the Financial Secretary concerning the fairness of the disallowance of subsistence for self-employed people when employees enjoy a deduction, and suggesting a change to the law to allow equality. Mr Robert Sheldon stated that he did not consider a change to the law to be necessary, because such expenditure was 'in practice' allowed. This is reflected in the rest of paragraph IM 860:
'But extra costs may be incurred wholly for business purposes where a business is by its nature itinerant (for example in the case of commercial travellers), or where occasional business journeys outside the normal pattern are made. Modest expenses incurred in these circumstances may be deducted from business profits.'
The question is whether the barristers are 'itinerant, like commercial travellers' (they may not like the comparison) or whether the meals are incurred on 'occasional business journeys outside the normal pattern'. If attendance at the same court is very regular, or the court is close to the normal place of business, the Revenue is more likely to object. But a barrister could probably argue that much of the expenditure falls within paragraph IM 860.
If the barrister can be bothered to obtain a VAT receipt for the food, Notice 700 paragraph 4.7 also allows input tax deduction for 'meals you take when you are away from your normal place of work on a business trip. But you cannot, however, recover the VAT on meals which are not taken for business purposes'. Customs Manual V1, Chapter 2A 18.1 refers to a case D G Mutch (MAN/87/109) (2559), in which a sole proprietor was held not to satisfy this test when taking meals only 'two or three miles from his office'. It is not clear how far away you have to go before your meals become allowable, but it seems that it is necessary both for the journey to have a business purpose, and for the journey to be substantial. – Leyborne.
Extract from reply by 'Jim':
Where journeys fall outside the normal working pattern, modest expenses incurred in these circumstances should be deducted from business profits. 'Toast' should have no qualms about making a claim as the court attendances are away from the barristers' homes and the circuit falls within the category of itinerant. As for the 'modest' amounts to be claimed, the Inland Revenue's rather secretive 'day subsistence' rates paid to Revenue staff (as published in Taxation, 5 April 2001 at page 24) look appetising enough to consider a section 33, Taxes Management Act 1970 claim and add a little cream to the cake.
Editorial note. This query attracted a bumper number of replies and so we had to be unduly selective.
