SCHEDULE D CASE III/SAVINGS AND INVESTMENT INCOME
Synopsis: The actor Tim Healy has lost his claim for tax relief on a flat he rented while working away from home because of his admission that the flat provided him with a spare room for guests.
Date posted: Monday, June 15, 2015
Tim Healy, who lives in Cheshire, decided to rent a flat in London while he was working in the West End for nine months during the 2005-06 tax year. He never intended to make London his home and the weekly cost of renting the flat was comparable to that of staying in a hotel or similar accommodation while giving him additional space for practice and coaching. He duly claimed the cost of the rental against his income for that year, as a necessary part of his expenses.
However, HMRC disallowed the claim, on the basis that the rental represented a private living cost rather than a cost of doing business.
Healy first appealed to the First-tier Tax Tribunal (FTT) in April 2012, where he won. The tribunal agreed that he had not moved house and so his expenses were wholly and exclusively work-related, in accordance with the Income Tax (Trading and Other Income) Act 2005, s34(1)(a). Accordingly he was granted relief on all his accommodation costs.
However, the case was sent back to the FTT for reconsideration on appeal by HMRC with the instruction that the actor’s intentions at the time of entering into the tenancy agreement should be taken into account.
The FTT has now given its second judgment on the case, taking account of the fact that Healy admitted in his evidence that part of his reason for renting a flat was that he wanted space for guests. This, said the FTT, meant that the flat rental was not wholly and exclusively incurred for the purpose of his business. The fact that the flat cost no more than a hotel was irrelevant to this duality of purpose. Nor could the non-business use of the flat be apportioned. It thus ruled against him and disallowed the claim (Healy v HMRC, 2015 UKFTT 233 TC).
Although the decision is this case was undoubtedly disappointing for the taxpayer, it is highly significant for other self-employed taxpayers who go away on business in that it leaves room for similar claims to succeed in cases where such an admission is not made.
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