Christmas Travel and Subsistence

A recent enquiry prompted me to revisit the rules for allowable travel and subsistence costs for self-employed individuals with particular reference to itinerant workers.  In keeping with the festive season a colleague suggested considering this in relation to Santa Claus.  

As with all self-employed business expenses, travel and subsistence must be incurred wholly and exclusively for the purposes of the trade in order to be allowable as a tax deduction.  Where there is a duality of purpose (i.e. an element of private use/benefit) a deduction is generally not allowed unless there is an identifiable proportion of the expense that can be attributed to an allowable business purpose. 

Travel between a person’s home and their base of operations is considered ordinary commuting and as such is not an allowable expense (there is an inherent duality of purpose in the individual making the journey to/from their home as they would for any other activity – the journey is not undertaken solely in the performance of their duties).  The first stage is therefore to identify where a person’s base of operations is. 

For the non-tax people among you perhaps the most famous itinerant worker with the largest sales region is Father Christmas himself and we’ll look as his situation a bit later.  For my fellow tax nerds,  you may recall the ‘landmark’ case a few years ago where the First Tier Tribunal found (and the Upper Tribunal held) that Dr Samadian’s base of operations was not his home and as such a proportion of travel expenses would be disallowed. 

Dr Samadian was employed full time by the Epsom and St Helier NHS Trust at two hospitals in South London.  He also held weekly out-patient sessions at two private hospitals and had a dedicated home office (although this was not used to meet patients).  HMRC sought to deny the deduction of travel costs for journeys to/from Dr Samdian’s home to his places of work. 

In arguing his case, Dr Samadian cited a previous case perhaps more relevant to the day to day operations of Mr Claus.  Mr Horton was a jobbing builder who typically worked at a site (away from his home) for a period of three weeks or so before moving on to another job.  It was held by all three Justices that his home was his only place of business and as such travel to/from his home to any site at which he undertook activities in relation to his trade was allowable. 

Looking forward to the Samadian case, the FTT stated that it could be distinguished from Horton on the basis that Dr Samadian had a pattern of attendance at the private hospitals and they could therefore be considered to also be his place of work (self-employment). 

The judgement stated that: 

  • there is a dual purpose to travel between his home and the private hospitals therefore the expenses are not allowable 
  • travel to the NHS hospitals was undertaken for non-business purposes (i.e. to maintain employment) therefore the expenses are not allowable 
  • travel between the two private hospitals is allowable 
  • travel between the private hospitals or his home and another private care location (e.g. the patient’s home) is allowable 

I don’t think anyone believes Santa makes all the toys himself (indeed it’s well documented that he has a team of highly-skilled elves), is the big man then simply a delivery driver?  Given that he personally receives orders from expectant children and presumably oversees the manufacturing it seems unlikely, but if so, the very nature of his duties is entirely allowable business mileage. 

That being said, I’m not aware of Santa seeking payment in exchange for the goods or services provided and any mince pies offered by his customers is unlikely to be considered a market value transaction.  In such circumstances there’s an argument he’s not acting in a commercial manner and no expenses would be allowable. 

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