TT281: Interesting Decisions
The recent Tribunal case of G Daniels was interesting on two fronts. Firstly, it highlighted the complexities surrounding the rules associated with claiming travel and other expenses for the self-employed, and secondly, because it gave a rather worrying indication of the tribunal’s interpretation of the behavioural related penalty regime.
The taxpayer was a self-employed exotic dancer who performed at a London nightclub. She claimed deductions for travelling expenses to and from her home to the club and other items such as clothing, lingerie, dry cleaning, make-up, beauty treatments and hairdressing. The taxpayer had an office at home from which she carried out work-related activities. HMRC refused the claim and imposed penalties under FA 2007, Sch 24 for careless completion of the returns. The taxpayer appealed.
The First Tier Tribunal (“FTT”), with the benefit of being able to read the decision in Dr Samad Samadian disallowed the travel claim. The FTT did however accept the taxpayer’s evidence that the dresses she bought to perform at the club could not be worn outside. They were see-through and skimpy so could not be described as providing ‘warmth and decency’ (Mallalieu v Drummond  STC 665). HMRC also allowed the other aspects of the claim.
Perhaps the most concerning aspect of the decision was that the tribunal upheld the penalties in respect of the travel. The reasoning being that the dancer was careless for not knowing the travel rules thereby suggesting that she should have understood the rules and challenged her accountant. This seems like a particularly strange decision having established that HMRC did not themselves understand the rules surrounding the other aspects of the claim which the FTT allowed.
Should you have any questions in respect of what is and what is not allowable as a deduction, please contact your Barnes Roffe partner.
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