Spc00690

EMPLOYMENT INCOME – employee having arrangement for working at home for two or three days a week – travelling expenses between home and office – whether amounts necessarily expended on travelling in the performance of the duties of the office or employment – no – whether expenses of ordinary commuting – yes – appeal dismissed   

THE SPECIAL COMMISSIONERS

	HAZEL PATRICIA LEWIS	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

		Special Commissioner: 	DR JOHN F. AVERY JONES CBE 

Sitting in public in London on 6 June 2008

The Appellant in person

Tony Mear, HMRC Appeals Unit Wales, Scotland and Northern Ireland, for the Respondents

© CROWN COPYRIGHT 2008

DECISION

1.	Mrs Hazel Patricia Lewis appeals against refusal of a claim for error or mistake relief for the year ended 5 April 2001, and against closure notices for the years ended 5 April 2002, 2003 and 2004.  The Appellant appeared in person; the Respondent (“the Revenue”) was represented by Mr Tony Mear.
2.	The issue in this appeal is the deductibility of the Appellant’s travelling expenses between her home (and also office) in Kenilworth, Warwickshire where she worked for two or three days a week and the Revenue’s office in Kingsway, London where she worked the remainder of the week.  It is an unusual feature of this appeal that the Appellant and her witness are employees of the Revenue, and her case was extremely clearly argued (as, naturally, was Mr Mear’s).
3.	There was an agreed statement of facts as follows:
(1)	“The Appellant, Ms Hazel Patricia Lewis, is known by the name Ms Hazel Preece at work. The documents in the evidence bundle that refer to Ms Hazel Preece refer to Ms Hazel Patricia Lewis. 
(2)	The Appellant has been continuously employed by the Revenue (and its predecessor department the Inland Revenue) since 1977.
(3)	Until 4 June 2000 the Appellant worked at various offices in the Midlands, all of which were in daily commuting distance of her home at 14 Wordsworth Drive, Kenilworth, Warwickshire, CV8 2TB. 
(4)	In early 2000 the International Division of the Business Tax Group of the Inland Revenue (BTG) advertised posts for International Specialists with a closing date for applications of 31 March 2000. 
(5)	In 2000, BTG had offices at Victory House, 30-34 Kingsway, London.
(6)	The vacancy information sheet stated that there would be “the opportunity to adopt an alternative working pattern including working from a remote location 2 or 3 days a week”. 
(7)	At March 2000, the Appellant was a working mother with three children. Two of those children were settled at schools near to her home with exam commitments. The Appellant also had a 10-month old baby who was cared for by a day nanny for 5 days a week, Monday to Friday. 
(8)	The contact points named on the vacancy information sheet for more information about the job were Graham Black and Elizabeth Musgrave. 
(9)	The International Specialist jobs advertised were graded at Band B1. At the time of application, the Appellant was a Band B2 so success would be a promotion. The Appellant applied for the vacancy and was successful in her application.  
(10)	The advert stated that there were currently 3 vacancies but there may be other opportunities in the next few months and a list of those reaching the minimum standard would be compiled for future vacancies. 
(11)	The Appellant took up her new post on 5 June 2000. 
(12)	It had been agreed between the Appellant and her employer prior to her taking up her new post that the Appellant could work at two different locations viz. her home at Kenilworth and the offices of BTG at Kingsway, London.  
(13)	On starting in her new post, the Appellant worked the whole of the week commencing 5 June 2000 at Kingsway, London.
(14)	From 12 June 2000 to 28 June 2000, the Appellant worked for two or three days a week at Kingsway, London and two or three days a week at her previous office location at Royal House, 2-6 Homer Road, Solihull. 
(15)	On 30 June 2000, IT equipment was installed at the Appellant’s home which, from that date onward, allowed her to work at that location using it as an office.
(16)	From 30 June 2000, the Appellant worked part of each week from the office at her home and part at the offices of BTG at Kingsway, London.
(17)	From 30 June 2000 the office at the Appellant’s home was one permanent workplace for the Appellant as was the BTG office at Kingsway, London.  
(18)	The IT equipment provided for the office at the Appellant’s home comprised a laptop, a docking station, a computer monitor screen, a printer, a keyboard and mouse.
(19)	The Inland Revenue arranged for the installation of a high speed ISDN line for computer data and a BT business phone line with phone and voicemail in the name of the Inland Revenue to a room at the Appellant’s home. Bills for provision of these services were sent quarterly directly by BT to The resource Manager, Inland Revenue Management Services Unit. 
(20)	The Inland Revenue also provided a desk extension, an office chair, a four-drawer lockable filing cabinet, a firs aid kit and a fire extinguisher for the office at the Appellant’s home. 
(21)	The Inland Revenue arranged for an electrician to test all of the electrical appliances in the office at the Appellant’s home. 
(22)	An additional insurance premium to cover the Appellant’s use a room of her home as an office was reimbursed by the Inland Revenue. 
(23)	In August 2002, the Appellant moved home, her new address being 33 Suncliffe Drive, Kenilworth. 
(24)	On moving home, the Appellant’s employer (the Inland Revenue) arranged for the transfer of all the office equipment and facilities listed at 18, 19 and 20 above to be transferred to the new office room in her new home which she then used as an office in the same way that she had used the room in her previous home. 
(25)	Work was allocated to the Appellant at both workplaces by email and telephone. Other work was delivered to the Appellant by internal post or by colleagues in person when she was at the London office. Internal and external customers dialling her London office telephone number would be automatically diverted to the telephone at the Appellant’s office at her home in Kenilworth.
(26)	The Appellant had files and post delivered to a named pigeon-hole at the Coventry Tax office post-room. The Appellant collected post from there and deposited any outgoing post. The Appellant disposed of confidential waste at the Coventry office and had access to photocopying facilities there. 
(27)	The Appellant was reimbursed the receipted amounts spent on travel to and from, and subsistence in London over the period 5 June 2000 to 14 March 2004 when her job changed. The reimbursements were called a variation on excess fares allowance. The reimbursements were paid to the Appellant on a quarterly basis and taxed under PAYE in the same way as pay. 
(28)	Should the Appellant’s appeal succeed, then her self-assessments should be determined as per schedule A [not attached]. Should the appeals fail then the self assessments should be determined as per schedule B [not attached]. 
(29)	Should the Appellant’s appeal against the refusal of error or mistake relief for 2000-2001 succeed, then the relief to be given is as per schedule C [not attached]. If the appeal fails, no relief is due.”
4.	I heard evidence from the Appellant and Mr Graham Black, at the time Assistant Director International in the Inland Revenue, and find the following additional facts:
(1)	The internal advertisement for International Specialists in Revenue Policy, International which contained the following:
“The Business Tax Group has 29 Band B International Specialists with technical, compliance and policy responsibilities for a range of subjects including transfer pricing, cross border financial avoidance, controlled foreign companies and company residence.  Their role is the investigation and negotiation of settlements in respect of international transactions carried out by the country’s largest multinationals.
…
The work may involve some travel including overnight absences, but this is flexible.  However there will also be the opportunity to adopt an alternative working pattern including working from a remote location 2 or 3 days a week…”.
(2)	The opportunity to adopt alternative working pattern was as a result of a policy change in parts of the Revenue where this was possible by reason of the nature of the work.  Mr Black thought that International Division was not receiving applications from the most able staff and he hoped that the change in policy would open up the opportunity to a wider group of staff, and also give them opportunities not available to them outside London.  He also thought that the staff mix did not reflect the diversity in the department and hoped that the new policy would attract more female and ethnic minority staff.  
(3)	The Appellant would not have applied for a full-time job in London and took the job only because the alternative working pattern described above was offered.  She was one of the top three candidates.  The details of the alternative working pattern were agreed between her and her line manager.  Originally she was not expecting to work from home but from a local Revenue office, which she did for a few weeks, but working from home became possible when the necessary computer equipment unexpectedly became available through the resignation of a colleague.  If she had not taken the job there were ten or eleven candidates who were qualified and another of them would have been appointed. There was no requirement to have an alternative working pattern and not all staff recruited at the time were offered this.
(4)	The duties of the job required attendance in London two or three days a week.  There were no duties that could be performed only, or were required to be performed only, at her home.  Having agreed the alternative working pattern it was inevitable that she had two workplaces and had to travel to London two or three days a week but the duties themselves did not require travel between the two workplaces.  The alternative working pattern was a matter of the Appellant’s personal choice.
5.	Section 198 of the Taxes Act 1988 (applicable for the years up to 2002-03) provides:
198 Relief for necessary expenses
(1) If the holder of an office or employment is obliged to incur and defray out of the emoluments of the office or employment—
 (a) qualifying travelling expenses, or
 (b) any amount (other than qualifying travelling expenses) expended wholly, exclusively and necessarily in the performance of the duties of the office or employment,
there may be deducted from the emoluments to be assessed the amount so incurred and defrayed.
(1A) “Qualifying travelling expenses” means—
 (a) amounts necessarily expended on travelling in the performance of the duties of the office or employment, or
 (b) other expenses of travelling which—
 (i) are attributable to the necessary attendance at any place of the holder of the office or employment in the performance of the duties of the office or employment, and
 (ii) are not expenses of ordinary commuting or private travel.
What is ordinary commuting or private travel for this purpose is defined in Schedule 12A.
Schedule 12A provides:
2(1) “Ordinary commuting” means travel between—
 (a) the employee's home, or
 (b) a place that is not a workplace in relation to the employment,
and a place which is a permanent workplace in relation to the employment. 
(2) “Private travel” means travel between—
 (a) the employee's home and a place that is not a workplace in relation to the employment, or 
 (b) between two places neither of which is a workplace in relation to the employment.
(3) In sub-paragraphs (1)(b) and (2) “workplace” means a place at which the employee's attendance is necessary in the performance of the duties of the employment.
6.	For the year 2003-04 the Income Tax (Earnings and Pensions) Act 2003 provides:
337 Travel in performance of duties
(1) A deduction from earnings is allowed for travel expenses if—
 (a) the employee is obliged to incur and pay them as holder of the employment, and
 (b) the expenses are necessarily incurred on travelling in the performance of the duties of the employment.
(2) This section needs to be read with section 359 (disallowance of travel expenses: mileage allowances and reliefs).
338 Travel for necessary attendance
(1) A deduction from earnings is allowed for travel expenses if—
 (a) the employee is obliged to incur and pay them as holder of the employment, and
 (b) the expenses are attributable to the employee's necessary attendance at any place in the performance of the duties of the employment.
(2) Subsection (1) does not apply to the expenses of ordinary commuting or travel between any two places that is for practical purposes substantially ordinary commuting.
(3) In this section “ordinary commuting” means travel between—
 (a) the employee's home and a permanent workplace, or
 (b) a place that is not a workplace and a permanent workplace.
(4) Subsection (1) does not apply to the expenses of private travel or travel between any two places that is for practical purposes substantially private travel.
339 Meaning of “workplace” and “permanent workplace”
(1) In this Part “workplace”, in relation to an employment, means a place at which the employee's attendance is necessary in the performance of the duties of the employment.
(2) In this Part “permanent workplace”, in relation to an employment, means a place which—
 (a) the employee regularly attends in the performance of the duties of the employment, and
 (b) is not a temporary workplace.
This is subject to subsections (4) and (8).
(3) In subsection (2) “temporary workplace”, in relation to an employment, means a place which the employee attends in the performance of the duties of the employment—
 (a) for the purpose of performing a task of limited duration, or
 (b) for some other temporary purpose.
This is subject to subsections (4) and (5).
(4) A place which the employee regularly attends in the performance of the duties of the employment is treated as a permanent workplace and not a temporary workplace if—
 (a) it forms the base from which those duties are performed, or
 (b) the tasks to be carried out in the performance of those duties are allocated there.
(5) A place is not regarded as a temporary workplace if the employee's attendance is—
 (a) in the course of a period of continuous work at that place—
 (i) lasting more than 24 months, or
 (ii) comprising all or almost all of the period for which the employee is likely to hold the employment, or
 (b) at a time when it is reasonable to assume that it will be in the course of such a period.
(6) For the purposes of subsection (5), a period is a period of continuous work at a place if over the period the duties of the employment are performed to a significant extent at the place.
(7) An actual or contemplated modification of the place at which duties are performed is to be disregarded for the purposes of subsections (5) and (6) if it does not, or would not, have any substantial effect on the employee's journey, or expenses of travelling, to and from the place where they are performed.
(8) An employee is treated as having a permanent workplace consisting of an area if—
 (a) the duties of the employment are defined by reference to an area (whether or not they also require attendance at places outside it),
 (b) in the performance of those duties the employee attends different places within the area,
 (c) none of the places the employee attends in the performance of those duties is a permanent workplace, and
 (d) the area would be a permanent workplace if subsections (2), (3), (5), (6) and (7) referred to the area where they refer to a place.
The parties are agreed that there is no difference in meaning between this and the former provisions and accordingly I shall not refer separately to the rewritten legislation.
7.	The Appellant contends:
(1)	Because the Revenue considered there was a shortage of qualified applicants it offered alternative working pattern jobs.  As in Owen v Pook 45 TC 579 the change in the Revenue’s policy to allow alternative working pattern jobs meant that whoever was appointed on those terms had two places of work and therefore was necessarily obliged to incur travelling expenses between the two.  She did far more of her duties at home than Dr Owen.  Her circumstances are similar to those in Taylor v Provan 49 TC 579 in that, although her qualifications were not unique, the employer could not obtain the services of the desired employee on other terms.  The Revenue could secure her services only by offering an alternative working pattern job.  She would not have accepted a traditional International Specialist job based in London.  Her job was different from that of other International Specialists based in London.
(2)	Ricketts v Colquhoun 10 TC 118 is distinguishable because Mr Ricketts had only one place where he could carry out the duties of his office as Recorder of Portsmouth.
(3)	If she had worked part of the time at a Revenue office near her home no question of ordinary commuting would arise.  The office at home was a fully-functioning office and the travel was between two offices and not from her home in the sense that word was used in the legislation.
(4)	Kirkwood v Evans 74 TC 481 is distinguishable because Mr Evans historically had office space at Leeds that he chose to give up solely for personal reasons, whereas she applied for a job that had two workplaces from the outset.
8.	Mr Mear, for the Revenue, contends:
(1)	So far as qualifying travelling expenses are concerned they are excluded as expenses of ordinary commuting.  The fact that her home is also a workplace does not prevent it from being a home, as Patten J said in Kirkwood v Evans at 496.  The Revenue’s office in Kingsway, London was not a temporary workplace.  Therefore the travel between her home and Kingsway is ordinary commuting.
(2)	The travel is not necessarily incurred because they arise from the Appellant’s personal circumstances of choosing to live.  There was no objective requirement that the duties of the employment necessarily had to be performed at any location other than the office in Kingsway.  The Appellant had an opportunity to work elsewhere but that was not an objective requirement of the duties of the employment.  The duties did not require them to be performed at he home.  When travelling she was travelling to her work and not on her work.  The Appellant is in the same position as the civil servant in Kirkwood v Evans.
9.	I start with the first head of qualifying travelling expenses: “amounts necessarily expended on travelling in the performance of the duties of the office or employment.”  As Lord Blanesburgh said in Ricketts v Colquhoun 10 TC 118 at 135:
“The language of the Rule points to the expenses with which it is concerned as being confined to those which each and every occupant of the particular office is necessarily obliged to incur in the performance of its duties, to expenses imposed upon each holder ex necessitate of his office and to such expenses only.”
This provision requires that the travelling expenses must be necessarily incurred by every holder of the office or employment in the performance of their duties.  Whether the expenses are necessary is determined not by reference to the circumstances of the particular individual who holds the office or employment but by the office or employment itself.
10.	The Appellant relied on Pook v Owen 45 TC 579.  The facts were that Dr Owen was appointed as part-time obstetrician and anaesthetist at a hospital 15 miles away from his general practice (and also his home).  He was on stand-by duty to deal with emergencies for one weekend a month as obstetrician, and at nights and one weekend a month as anaesthetist.  He would be telephoned by the hospital and would give some instructions over the telephone and set off by car to the hospital.  He had responsibility for the patient as soon as he received the telephone call and it was found as a fact that his duties started at that time.  It was held that the travelling was in the performance of his duties.  The reason for this was explained by Lord Reid in Taylor v Provan 49 TC 579 at 605:
“I think that the distinguishing fact in Owen’s case was that there was a part-time employment and that it was impossible for the employer to fill the post otherwise than by appointing a man with commitments which he would not give up.  It was therefore necessary that whoever was appointed should incur travelling expenses.”
Owen v Pook is therefore an example of a situation where every person holding the job would incur travelling expenses because the persons eligible for the job were a limited class all of whom would necessarily travel in the course of their duties.
11.	Tayor v Provan was also relied on by the Appellant.  In it Mr Taylor, who was an expert in brewery amalgamations, lived and worked in Canada and was appointed a director of an English company with a special assignment of negotiating brewery amalgamations.  In the course of his work he travelled to England, which was held to be deductible.  It was an even more extreme case where the taxpayer’s experience was unique.  As Lord Reid said:
“But here the office or employment was created for the Appellant because of his special qualification, and there is nothing to suggest that if he had not been available anyone else would or could have been appointed for this very special work.”
The case is therefore the ultimate example of the rule that every person holding the job would incur travelling expenses, because there was only one person who could hold the job.
12.	The essential difference between the parties is about the identification of the job and accordingly the nature of the duties.  The Appellant contends that the job in question is that of alternative working pattern International Specialist, with the consequence that every holder of that job would have two workplaces, and therefore travel between them was necessary in the performance of the duties.  Mr Mear contends that the job in question is that of an International Specialist generally.  The duties were based in London.  The fact that the Appellant (and a few others) were permitted to work from home for part of their time was an exception made on account of the personal circumstances of Appellant (and a few others) which has nothing to do with the duties of the job of International Specialist.
13.	I agree with Mr Mear’s approach.  In my view the job in question is that of International Specialist generally of which the Appellant is one of the 29 mentioned in the advertisement.  I consider it to be artificial to say that there is a separate job of alternative working pattern International Specialist; the alternative working pattern is merely an option that the employee may, in the words of the advertisement, have “the opportunity to adopt” with the agreement of the employer.  As Mr Mear said, the alternative working pattern was peripheral to the employment.  The Appellant contended that her job was different from that of the other International Specialists but the difference was solely the alternative working pattern allowing her to perform duties elsewhere, rather than any inherent difference in the duties themselves or in the place where by their nature they were required to be performed.  For travelling expenses to be allowable the cost must be necessarily expended in the performance of the duties.  Here there is nothing about the duties that required them to be performed at her home.  To be in the same position as Dr Owen the Appellant would have to show that every holder of the job, which I have identified as that of International Specialist and not alternative working pattern International Specialist, would be required to have two workplaces.  This would be the case if she could show that the only possible appointees lived outside London and were unable to travel to London every day because of other commitments.  The most that she can show is that she and some other holders of the job were in that position, which is not sufficient to qualify.  Accordingly the travel expenses are not necessarily incurred in the performance of her duties.
14.	I turn next to second head of qualifying travel expenses: 
“other expenses of travelling which—
 (i) are attributable to the necessary attendance at any place of the holder of the office or employment in the performance of the duties of the office or employment, and
 (ii) are not expenses of ordinary commuting or private travel.”
Sub-para (i) is satisfied; the issue is whether the expenses are of ordinary commuting.  The first head of that definition is travel between the employee’s home and a permanent workplace.  The travel in question is between the Appellant’s home and a permanent workplace at Kingsway, London.  The fact that the travel is also between her office at home and Kingsway does not prevent it from being from her home, as Patten J said in Kirkwood v Evans 74 TC 481 at 496.  The Appellant is in the same position as the taxpayer in that case and fully within the principle of the case even though there may be factual differences.  The expenses are therefore excluded as being expenses of ordinary commuting.
15.	Accordingly I dismiss the error or mistake claim and the appeals and determine them in the following agreed figures:
(1)	2000-01: no repayment due
(2)	2001-02: £69.10 payable
(3)	2002-03: £20.00 repayable
(4)	2003-04: £30.64 repayable.

JOHN F. AVERY JONES

SPECIAL COMMISSIONER
RELEASE DATE: 13 June 2008

SC 3211/07

Authorities referred to in skeletons and not referred to in the decision:
Miners v Atkinson 68 TC 269
Brown v Bullock 40 TC 1