Sargent (Inspector of Taxes) v Barnes

[1978] 2 All ER 737

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Between: Sargent (Inspector of Taxes)
And: Barnes

Court:

Judge: Oliver J

Subject References:
Income tax
Deduction in computing profits
Travelling expenses
Travel between home and place of work
Dental surgeon maintaining a laboratory to repair, alter and manufacture dentures
Laboratory between taxpayer's home and surgery
Taxpayer calling at his laboratory on his journey to and from his home to the surgery
Whether expense of travelling between laboratory and surgery wholly and exclusively laid out for purpose of taxpayer's practice

Legislative References:
Income and Corporation Taxes Act 1970 - s 130(a)

Case References:
Bentleys, Stokes & Lowless v Beeson (Inspector of Taxes) - [1952] 2 All ER 82; 33 Tax Cas 491; 31 ATC 229; [1952] TR 239; 45 R & IT 461, CA; 28(1) Digest (Reissue) 150, 465
Bowden (Inspector of Taxes) v Russell and Russell - [1965] 2 All ER 258; [1965] 1 WLR 711; 42 Tax Cas 301; 44 ATC 74; [1965] TR 89; 28(1) Digest (Reissue) 244, 761
Horton (Inspector of Taxes) v Young - [1971] 3 All ER 412; [1972] Ch 157; [1971] 3 WLR 348; 47 Tax Cas 60; 50 ATC 207; [1971] TR 181, CA; affg; [1971] 2 All ER 351; [1972] Ch 157; [1971] 2 WLR 236; 47 Tax Cas 60; Digest (Cont Vol D) 467, 1264
Newsom v Robertson (Inspector of Taxes) - [1952] 2 All ER 728; [1953] Ch 7; 33 Tax Cas 452; 31 ATC 429; [1952] TR 401; 45 R & IT 679, CA; 28(1) Digest (Reissue) 244, 760
Caillebotte (Inspector of Taxes) v Quinn - [1975] 2 All ER 412; [1975] 1 WLR 731; [1975] STC 265; 50 Tax Cas 222
Edwards (Inspector of Taxes) v Bairstow - [1955] 3 All ER 48; [1956] AC 14; 36 Tax Cas 207, HL
Hillyer v Leeks (Inspector of Taxes) - [1976] STC 490
Pools (Inspector of Taxes) v Owen - [1969] 2 All ER 1; [1970] AC 244; 45 Tax Cas 571, HL

Hearing date: 1 March 1978
Judgment date: 2 March 1978

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The taxpayer, a dental surgeon, maintained a laboratory between his home and his surgery. The laboratory was about one mile from his home and about 11 miles from the surgery. The laboratory was maintained for the purpose of the repair, alteration and making of dentures. Each morning on his way to the surgery the taxpayer spent about ten minutes at the laboratory to collect completed work. Each evening after closing his surgery the taxpayer called at the laboratory to deliver dentures and other articles to the technician working there. It was not in dispute that the laboratory was a proper adjunct to his practice and that the work done there was exclusively referable to the practice. In computing his profits under Sch D, Case II for the years 1972-73 to 1974-75, the taxpayer claimed that his work commenced each day when he arrived at the laboratory and that his travelling expenses between the laboratory and the surgery were expenses wholly and exclusively incurred for the purposes of carrying on his profession and accordingly were allowable deductions under s 130(a) ^[Fa] of the Income and Corporation Taxes Act 1970. The General Commissioners concluded that it was absolutely necessary for the taxpayer to travel back and forth from his laboratory to the surgery to enable him to carry on his profession and accordingly upheld the taxpayer's claim. The Crown appealed.

Held: On the facts, it could not be said that the taxpayer was in any relevant sense carrying on his profession at the laboratory. Thus the travelling expenses incurred by the taxpayer were for the purpose of enabling him to get from his private residence to his surgery. The fact that it served the purpose also of enabling him to stop at an intermediate point to carry out an actively exclusively referable to his profession could not affect the purpose of the journey once the intermediate point was passed. In the circumstances, the commissioners could not have properly arrived at the conclusion that expenses incurred by the taxpayer in travelling between the laboratory and the surgery had been incurred wholly and exclusively for the purpose of the practice. The appeal would therefore be allowed (see p 745 b c and f to h, post).

Notes

For deductions in respect of travelling expenses in computing profits for income tax purposes, see 20 Halsbury's Laws (3rd Edn) 158-161, paras 277-279, and for cases on the subject, see 28(1) Digest (Reissue) 244, 347-349, 760-761, 1253-1264.

For the Income and Corporation Taxes Act 1970, s 130, see 33 Halsbury's Statutes (3rd Edn) 182.

Case stated

1. At a meeting of the Commissioners for the General Purposes of the Income Tax for the Division of Northleach in the County of Gloucester held on 10 September 1975 in the Clerk to the Commissioners' Office, Abbey Terrace, Winchcombe in the County of Gloucester, Mr Peter Albert Barnes ('the taxpayer') who carried on his profession as a dental surgeon at Wentwood House, High Street, Winchcombe, appealed against assessments made on him under Case II of Sch D as follows: 1972-73, £2,700; 1973-74, £3,600; 1974-75, £3,600. All three years were based on one set of accounts for the year ended 31 May 1973, the taxpayer having commenced business in that year.

2. The taxpayer, who lived at Badgeworth, near Cheltenham, and maintained a dental laboratory at The Reddings, Cheltenham, and had his dental surgery in Winchcombe, travelled by motor car each day from his home in Badgeworth to his laboratory in Cheltenham (a distance of one mile) and thence to his surgery in Winchcombe (a distance of ten to 11 miles). The point at issue was whether the travelling expenses of the taxpayer between his laboratory in Cheltenham and his surgery in Winchcombe was an allowable deduction for income tax purposes. The amount of the travelling expenses for the full year amounted to £170 and of that the taxpayer was seeking to deduct £160. (The amount of the expenses was not in dispute).

3. Mr Mobley of Messrs Marcus Hazlewood, accountants of Cheltenham, appeared for the taxpayer.

4. The taxpayer gave evidence before the commissioners.

5. The following facts were admitted or proved.

(1)

The taxpayer lived at Badgeworth, near Cheltenham.

(2)

The taxpayer maintained a dental laboratory for the purpose of the repair, alteration and making of dentures in an outbuilding at his father's residence, 'Glenleigh', The Reddings, Cheltenham.

(3)

The taxpayer did not pay any rent to his father, but he did contribute towards the cost of the electricity. The taxpayer provided his own gas.

(4)

A self-employed technician worked on a part-time basis (although exclusively for the taxpayer) at the laboratory where he carried out the taxpayer's work only. The technician did not receive a regular wage: he was paid a set rate for each job which he carried out.

(5)

It was necessary for the taxpayer to have the services of a laboratory to carry out his work, since his was a one man practice, the only alternative to his having his own laboratory being for him to use a postal service run by a commercial laboratory. However it was far preferable for him to have his own laboratory since its dental services must be readily available and speedily executed in the interests of the parties.

(6)

Each morning on his way to his surgery the taxpayer spent about ten minutes at the laboratory in order to collect completed work, and, as necessary, to discuss matters with his technician.

(7)

Each evening, after closing his surgery in Winchcombe, the taxpayer called at his laboratory in Cheltenham in order to deliver dentures and other articles which he had received during the day and during the course of his evening visits to his laboratory, he sometimes spent 30 minutes to one hour advising on or working on dentures before proceeding on his journey homewards.

(8)

The taxpayer visited patients on his way from the surgery to the laboratory about twice a week.

(9)

On about a dozen occasions in a year, the taxpayer had to travel from his surgery to his laboratory and back during working hours.

6. The taxpayer contended that to carry out his profession properly it was essential for him to visit his laboratory every morning before going to his surgery and each evening on his way home and that his work commenced each day when he arrived at the laboratory and that the journey from the laboratory to the surgery each day was wholly and exclusively for the purposes of his profession.

7. It was contended by the Crown:

(a)

that the travelling expenses claimed by the taxpayer were not laid out wholly and exclusively for the purposes of the taxpayer's profession and were not deductible in computing his profits on account of s 130(a) of the Income and Corporation Taxes Act 1970;

(b)

that the expenses were incurred for the purpose or partly for the purpose of enabling the taxpayer to journey to and from his home and his surgery and, as this purpose was a private purpose distinct from the purposes of his profession, they were precluded from being deducted in computing his profits by s 130(b) of the 1970 Act;

(c)

that no part of the expenses claimed was an allowable deduction.

[Paragraph 8 listed the cases ^[Fb] cited to the commissioners.]

9. Having considered the facts and heard the arguments on each side and giving the matter very careful consideration, the commissioners came to the conclusion that it was absolutely necessary for the taxpayer to travel back and forth from his laboratory in Cheltenham in order to enable him to carry on his profession as a dentist. They, accordingly, decided that the expenditure in respect of the travelling expenses as claimed, namely £160, was an allowable expenditure. They then determined the assessments in the following figures which were agreed by the Crown and the taxpayer on the basis that their decision in the contentious matter was correct.

10. Immediately after the determination of the appeal the Crown declared its dissatisfaction therewith as being erroneous in point of law and, in due course, required the commissioners to state a case for the opinion of the High Court, pursuant to s 56 of the Taxes Management Act 1970.