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We act for a self-employed courier, who drives all over the United Kingdom making deliveries. He tries to get back home every night and manages to do so most of the time, very often having a ten-hour day.
We act for a self-employed courier, who drives all over the United Kingdom making deliveries. He tries to get back home every night and manages to do so most of the time, very often having a ten-hour day.
He has to eat most of his meals 'on the hoof' as it were and, whilst he takes some sandwiches, frequently has to buy food and drink. He keeps his expenses to a minimum, but reckons he spends around £6 per day on average, and often works six days per week. The Inspector proposes to disallow all such expenditure on the Caillebotte v Quinn principle. Inspectors in other local districts say that £6 per day would not appear excessive to them. We have challenged the Inspector, quoting the amounts which the Revenue allows its own employees, but he tells us that has no bearing on the matter as that is Schedule E, whereas our client is Schedule D. I would have thought the reverse should operate! We have provided vouchers, and very grudgingly the Inspector says he may allow £3 per day! Do we go to the Commissioners on this small matter, or is there any sort of agreed figure in this type of case?
(Query T15,935) – Kai Tak.
In the case of Caillebotte v Quinn 50 TC 222 a sub-contract carpenter worked on sites within a 40-mile radius of his home. As it was impractical to go home for lunch, he bought a meal each day and claimed a deduction of 30 pence per day as an estimate of the additional expense incurred compared to the cost of lunch at home (the case was decided in 1975!). In this case, he always returned to his home each night. Caillebotte lost the case and was denied any deduction. The main reason for the denial of the deduction was that it is impossible to artificially split a meal into business and non-business amounts in that the cost was incurred in order to satisfy the basic human need to eat. This is illustrated by the following comment by (the then) Mr Justice Templeman:
'The cost of protective clothing worn in the course of a trade will be deductible because warmth and decency are incidental to the protection necessary to the carrying on of the trade. There is no such connection between eating and carpentry.'
The legislative background to the decision was what is now section 74(1)(a), Taxes Act 1988 in that the cost was not wholly for business purposes because he had to eat to live. A second argument, which the judge did not consider it necessary to consider, was whether it was an expense of his personal maintenance within section 74(1)(b).
The case is therefore unhelpful to 'Kai Tak's' client. This together with a strict interpretation of the legislation would seem to deny any relief for the cost of the lunches. All is not necessarily lost, however. There are a number of differences between Caillebotte and the client.
(1) Caillebotte only claimed a part of the cost whereas the client claimed the full cost. In the judgment, the judge said:
'It is not without significance that in the present case the taxpayer does not claim the whole of the cost of his lunch as an allowable expense, but only part of the cost. This attempt to apportion discloses the duality of purpose that is fatal under section 130 (now section 74, Taxes Act 1988).'
(2) Caillebotte's claim was a pure estimate of costs unsupported by receipts. It appears that the client retained receipts for the expenditure and has been able to provide them to the Inland Revenue.
(3) Caillebotte worked within a very limited radius of his home and never stayed away from home. The client travels throughout the country, presumably with no two days having the same journey. He also stays away from home on occasions.
The strongest support for a deduction for the entire expenditure comes, however, from the Inland Revenue's own manual (paragraph IM860 of the Inspector's Manual). After confirming that in general the cost of meals is not an allowable expense and that costs may not be apportioned, it then has a section headed 'Itinerant trade – Journeys outside the normal pattern'. This goes on to say:
'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 client clearly has a business which is by its nature itinerant. The sums claimed by the client are receipted and must clearly be reasonable since the Inland Revenue allows its staff a day subsistence rate of £9.30 per day (see Taxation, 5 April 2001).
Case law and the legislation suggest that an appeal through the Commissioners and ultimately the courts may well be unsuccessful. It is therefore suggested that 'Kai Tak' proceeds as follows:
* Write to the Inspector detailing the differences between the position of his client and Caillebotte.
* Explain that there is no provision for the apportionment of expenditure as the Inspector has proposed: the deduction is all or nothing.
* Refer the Inspector to the guidance in his own manuals.
* Refer to the Taxpayer's Charter requirement to treat all taxpayers equally which is clearly not happening if internal guidance is being selectively ignored.
* Ask for the matter to be referred to the District Inspector if he cannot agree to a full deduction of costs. – Wentworth.
Schedule D and Schedule E taxpayers (including Revenue employees!) are no different – they all have to eat. Therefore if the Revenue interprets the law so that consumption of food is an allowable Schedule E expense, then on that basis there is no contradictory argument.
I will therefore extract from various sources the conditions and obligations surrounding the allowability of meal expenses (mainly for employees), and see if it can be argued that they are acceptable for the self-employed courier.
Inland Revenue Schedule E Manual
Paragraph SE66140. Allowances paid by employers
'Many employers meet the cost of, or contribute towards, a driver's midday meal by either issuing meal vouchers or making a cash payment. These contributions may be treated as not taxable where they –
are reasonable in amount, that is do not exceed £2 per day …'
Paragraph SE66156. Travelling appointments
'Where travelling itself is an essential feature of an employee's duties, with the result that he has to spend money on meals in restaurants and cafés above what he would spend if he had a fixed place or area of work or were able to get home for meals, a deduction may be allowed for extra expenses necessarily incurred in the performance of duties.'
Paragraph SE66175. Evidence required
'Where you decide that a deduction for meals can be permitted in principle, you will need to obtain appropriate evidence to calculate the amount of the deduction …'
Inland Revenue Inspector's Manual
Schedule D: 860 Expenditure on lunches, etc.
'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 (see … Caillebotte v Quinn 50 TC 222 …). 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.
'Itinerant trade journeys outside the normal pattern
'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), … Modest expenses incurred in these circumstances may be deducted from business profits.'
Particular trades: 3122 Travelling expenses
'Accommodation and subsistence – Caillebotte v Quinn is authority for disallowing the cost of a subcontractor's lunches where there is a regular work pattern involving travel to different sites within a narrow radius of the subcontractor's home.
'Where such costs are not deductible there can be no apportionment of the expenditure to allow the additional expense of lunching away from home. The treatment outlined above applies even though the "business base" is at the home address …".' It then goes on to say that overnight subsistence away from home including the reasonable cost of meals taken there is allowed.
Other very useful sources are:
(1) the replies to the 'RoadRunner' query in Taxation, 6 December 2001 at page 262. In these replies it was agreed that midday meals should be allowed in the accounts; and
(2) John Newth's article 'Living or just Subsisting?' in Taxation, 26 October 2000 on pages 96 and 97. This goes a long way to substantiating the need for a change of opinion by the Inland Revenue and concludes with, 'it is high time Caillebotte v Quinn is reversed by another suitable case taken through the courts'.
So we can see that money spent on (midday) meals can be treated as allowable expenditure, and even though it is mainly employees who are approved of, this should not stop a valid expense deduction in this case. However, as only £2 was mentioned in paragraph SE66140 of the Schedule E Manual, and despite what other Inspectors think, together with a quote from Hansard dated 6 December 1976 'a self-employed individual may deduct modest expenditure on meals consumed in the course of a travelling occupation …', the possibly allowable £3 by the Inspector in question, may well be generous.
So the thought of 'going to the Commissioners' and the expected reward needs to be weighed up carefully against time and cost; unless of course, as mentioned above, 'Kai Tak' would be prepared to go the whole hog and take the case to the courts. – Goldstone.
