[2010] UKFTT 283 (TC)

TC00572

Appeal number TC/2009/14111

INCOME TAX – EMPLOYMENT INCOME – EXPENSES – specialist registrar in urology on a six year training programme within the NHS – appellant based at one hospital and undertaking rotational appointments at other hospitals - payment by employer, in respect of travel from place where living to place of rotational appointment, of mileage in excess of distance to base hospital – whether tax exempt as removal benefits or removal expenses (ITEPA s.271) – in the circumstances of the case, no – whether tax exempt under the travel expenses rules (ITEPA ss.337 to 339) – in the circumstances of the case, no – emergency call out fees – whether tax exempt (ITEPA ss. 62 and 338) – in the circumstances, yes, up to a limit of 40 pence per mile (ITEPA ss. 229 and 230)

FIRST-TIER TRIBUNAL

TAX 

	DR MICHAEL WILKINSON	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

			TRIBUNAL: 	Dr Christopher Staker (Tribunal Judge)
					MR CHRISTOPHER JENKINS (Tribunal Member)

					

Sitting in public in Southampton on 21 May 2010

The Appellant in person

Mr Riordan, HMRC Presenting Officer, for the Respondents

DECISION

Introduction
1.	The Appellant is a specialist registrar in urology working within the NHS.  In tax year 2003/2004, he was paid expenses totalling £3,416.19 pursuant to an entitlement in his conditions of employment to relocation expenses.  This payment is referred to below as the “relocation expenses”.  In tax year 2005/06, while working at Southampton University Hospitals NHS Trust, he was paid £633.88 for what was described as emergency call-out expenses.  This payment is referred to below as the “call-out expenses”.  
2.	When the Appellant submitted his self-assessment tax returns for each of those tax years, he did not include either payment as income from his employment although they had been shown as such by his employers in his P45s.  Following an enquiry under the Taxes Management Act 1970 (the “TMA”) into the Appellant’s self-assessment tax return, HMRC issued notices of assessment under s.29 of the TMA in respect of these two amounts.  The Appellant, who made prompt payment of the additionally assessed tax, now appeals against both of those assessments.  The Appellant contends that both of those amounts are exempt from tax.  HMRC contends that they are not.  
The relevant legislation
3.	Section 62 of the Income Tax (Earnings and Pensions) Act 2003 (“ITEPA”) relevantly provides that:
(1)	This section explains what is meant by “earnings” in the employment income Parts.
(2)	In those Parts “earnings”, in relation to an employment, means—
(a)	any salary, wages or fee,
(b)	any gratuity or other profit or incidental benefit of any kind obtained by the employee if it is money or money's worth, or
(c)	anything else that constitutes an emolument of the employment.
(3)	For the purposes of subsection (2) “money's worth” means something that is—
(a)	of direct monetary value to the employee, or
(b)	capable of being converted into money or something of direct monetary value to the employee.
...
4.	Section 271 of ITEPA relevantly provides that:
(1)	No liability to income tax in respect of earnings arises by virtue of—
(a)	the provision of removal benefits to which this section applies, or
(b)	the payment or reimbursement of removal expenses to which this section applies.
...
(3)	Subsection (1) is subject to section 287 (limit on exemption).
5.	Section 272 of ITEPA relevantly provides that:
(1)	Benefits are removal benefits to which section 271 applies if—
(a)	they are reasonably provided in connection with a change of the employee's residence which meets the conditions in section 273,
(b)	they are provided on or before the limitation day (see section 274), and
(c)	they are within ... one of the following provisions—
...
(v)	section 281 (travelling and subsistence), ...
6.	Section 273 of ITEPA relevantly provides that:
(1)	The conditions referred to in section 272(1)(a) and (3)(a) which apply to the change of the employee's residence are conditions A to C.
(2)	Condition A is that the change of residence results from one of the following changes—
(a)	the employee becoming employed,
(b)	an alteration of the duties of the employment, or
(c)	an alteration of the place where the employee is normally to perform those duties.
(3)	Condition B is that the change of residence is made wholly or mainly to allow the employee to reside within a reasonable daily travelling distance of the place where the employee normally performs or is normally to perform the duties of the employment after the employment change (see section 275).
(4)	Condition C is that the employee's former residence is not within a reasonable daily travelling distance of that place.
7.	Section 274(1) of ITEPA relevantly provides that:
(1)	In this Chapter “the limitation day”, in relation to an employee's change of residence, means the last day of the tax year after that in which the employee begins to perform the duties of the employment after the employment change, but this is subject to any direction under subsection (2).
8.	Section 281 of ITEPA provides that:
(1)	The following benefits are within this section—
...
(c)	facilities provided for the employee for travel between the employee's former residence and—
(i)	the place where the employee's new duties are normally performed, or
(ii)	the new place where the duties of the employee's employment are normally performed, or
(iii)	temporary living accommodation of the employee, 
... 
(4)	The cost of providing subsistence or travel of a kind described in subsection (1) is an expense within this section. 
(5)	Subsections (1) and (4) are subject to section 282 (exclusion from this section of benefits and expenses where deduction allowed), and subsection (1) is also subject to section 283 (exclusion from this section of taxable car and van facilities). 
(6)	In this section—
“new duties” means—
(a)	if the employment change is within section 273(2)(a) (change of employer), the duties of the employee's new employment, and
(b)	if the employment change is within section 273(2)(b) (change of duties), the new duties of the employment, 
... 
9.	Section 287(1) of ITEPA provides that:
(1)	If in the case of any change of residence the value of the exemption exceeds £8,000, section 271 (exemption of removal benefits and expenses) does not apply to the excess.
10.	Sections 229 to 236 of ITEPA set out the rules for mileage payment allowance.
11.	Section 338 of ITEPA provides that:
(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. 
(5)	In subsection (4) “private travel” means travel between—
(a)	the employee's home and a place that is not a workplace, or
(b)	two places neither of which is a workplace. 
(6)	This section needs to be read with section 359 (disallowance of travel expenses: mileage allowances and reliefs). 
12.	Section 339 of ITEPA provides that:
(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. 
13.	The powers of HMRC in respect of enquiries and closure notices and assessments, and the Tribunal’s powers on appeal against amendments to self-assessments and against assessments are set out in the TMA.
The hearing
14.	The Appellant appeared and presented his case in person.  HMRC was represented by Mr Riordan who presented the HMRC case.  In the course of presenting his case, the Appellant gave evidence, and no other witnesses were called.  The Tribunal heard submissions and arguments from the Appellant and Mr Riordan.  The Tribunal had before it a skeleton argument for HMRC, a joint documents bundle, an HMRC authorities bundle, and other documents produced for the hearing.  Certain documents were produced at the hearing itself, to which there was no objection by the parties.
The evidence and arguments of the parties
15.	The Tribunal has given careful consideration to all of the evidence, arguments and documents that have been presented to it.  Ultimately, the Tribunal does not consider it necessary to set out all of the details of the evidence, arguments and documents in this decision.  Omission of any detail does not mean that it has not been considered.
16.	In essence, the Appellant’s case is as follows.
(a)	The “relocation expenses” (tax year 2003/2004) 
17.	In late 2002, the Appellant was appointed by Wessex Deanery to a 6 year training programme in urological surgery.  The programme consisted of rotational placements at four different NHS Trusts, in Portsmouth, Winchester, Southampton and Bournemouth respectively.  However, throughout the entire programme, his nominated base hospital was the Royal Hampshire County Hospital in Winchester.  
18.	The Appellant’s case is that the entire 6 year programme constituted one single “employment”, in which his permanent workplace was in Winchester, and in which the other NHS Trusts where he held rotational appointments were temporary workplaces.
19.	Part of the Appellant’s entitlements under his 6 year training programme was a relocation package, under which certain relocation assistance could be provided up to a maximum £8,000 for the entire 6 year programme.  
20.	The Appellant submitted that relocation expenses up to £8,000 were tax exempt under the law (ITEPA s.287(1)).
21.	At the time that the Appellant commenced the programme, he was living in Bristol.  His first rotational appointment, from January 2003, was in Portsmouth.  He could have used the whole of the £8,000 relocation package to sell his home in Bristol and relocate to Winchester.  However, the sale of his property in Bristol was ultimately only completed in late 2003, when his rotation in Portsmouth was nearly over.  He therefore decided that he would instead avail himself of the possibility of claiming “excess mileage” under his relocation package.  In December 2003, he made a lump sum claim for excess mileage dating back to January 2003.  
22.	From the time that the Appellant’s first rotation in Portsmouth began, and until June 2003, he lived near Guildford.  From June 2003 he lived in Ovington, near Alresford, near Winchester.  In respect of each period, he claimed the difference in mileage between (1) the distance from the place he was living and Winchester, and (2) the distance from the place he was living and Portsmouth.  The lump sum claim was made on this basis.  
(b)	The “call out expenses” (tax year 2005/2006) 
23.	These expenses were paid to the Appellant during his rotation in Southampton.  A payslip dated 31 August 2005 shows that the Appellant was paid £633.88 in “emergency call out”, being 1196 miles at 53 pence per mile.
24.	The Appellant relied on HMRC’s EIM Manual, at EIM10040, which states the HMRC position that three conditions must be satisfied for “emergency call-out” expenses not to be taxable as earnings.  These conditions are that:
(a)	the employee gives advice on handling the emergency on receipt of the telephone call and
(b)	the employee accepts responsibility for those aspects appropriate to his or her duties from that time and
(c)	the employee has a continuing responsibility for the emergency whilst travelling to their normal place of employment. 
25.	The Appellant said that throughout his urological career he had participated in non-resident emergency on-call rotas.  This meant that outside normal working hours he resided at home but had to remain contactable by telephone.  No hospital in the Wessex Deanery provided on-call accommodation for surgeons.  
26.	The Appellant said that most calls required him to give advice but on occasion he needed to attend the hospital to perform emergency surgery.  On getting a call he would give advice on the immediate and future management while accepting full responsibility for the patient from that time.  After embarking on the journey to the hospital he would remain in contact by mobile phone, in order to organise the theatre team, x-ray, pathology, blood bank, and so forth, so that everything would be in place when he arrived at the hospital.  He therefore began duties on receipt of the phone call at home and the whole of his journey was necessary exclusively for his duties.  The Appellant relied on Pook (HMIT) v Owen 45 TC 571.
27.	The Appellant said that some of the details in HMRC documents were inaccurate.  He referred in particular to an HMRC letter to him dated 25 August 2009, which stated that the Appellant had stated to HMRC in a telephone conversation that the duty registrar remained responsible for the patient until the Appellant arrived at the hospital.  The Appellant said that there was no “Duty Registrar”, that he himself was the registrar on duty, and that he had responsibility for the patient from the time that he received the telephone call at home.  He said that the inaccuracy in the HMRC letter may have been the result of poor communication on his part.  He acknowledged that he had done nothing to correct this inaccuracy.  
28.	The Respondent’s case is in essence as follows.  
(a)	The “relocation expenses” (tax year 2003/2004) 
29.	The HMRC position is that each of the four different NHS Trusts at which the Appellant worked during the six year programme constituted a separate employment.  Accordingly, at the time that the lump sum claim for “excess mileage” was made, the hospital in Portsmouth was the Appellant’s permanent workplace in respect of his then employment.
30.	Mr Riordan said that HMRC had previously proceeded on the assumption that the Appellant had made no claim for mileage in respect of periods prior to his move to Ovington.  Mr Riordan said that if the Appellant was paid travelling expenses prior to his move to Ovington, this might be part of a relocation package.  However, this would not be the case in respect of payments made after the Appellant’s move to Ovington.  Furthermore, Mr Riordan said that the Appellant had in December 2003 made a single lump sum claim from his employer for excess mileage and that there was no breakdown of this figure to show what the actual miles were.  
31.	Mr Riordan said that while the Appellant had been relying on the provisions of ITEPA relating to relocation expenses, HMRC had also considered the matter from the perspective of the travel expenses rules under ITEPA ss.337 to 339.  He said that if, contrary to HMRC’s submission, all of the rotations in the 6 year programme were considered to be a single employment, and if Winchester were considered to be the permanent place of employment and the other NHS Trusts as temporary places of employment, then the appeal would be allowable.  However, he argued that if there was one single place of employment, it would be expected that there would be a contract with Wessex Deanery for the whole programme.  There was no evidence of this.  Rather, the evidence showed separate appointments by each of the NHS Trusts where the Appellant worked.
(b)	The “call out expenses” (tax year 2005/2006) 
32.	The HMRC position is that the call out expenses are subject to ITEPA s.62.  The evidence is that the Appellant was only responsible for patients once he arrived at the hospital.  HMRC concedes that if the Tribunal were to be satisfied on the evidence that, as a matter of fact, the Appellant was performing duties while travelling to the hospital, then he would be entitled to deduct the call out expenses.  
33.	However, HMRC contends that by virtue of ITEPA ss.229 and 230, the Appellant would in any event only be entitled to this deduction at the rate of 40 pence per mile, not the 53 pence per mile that the Appellant was in fact paid.  Mr Riordan submitted that if the Tribunal was satisfied that the expenses were incurred in the performance of his duties, only £478.40 of the £633.88 received by the Appellant would be tax exempt (1196 miles at 40 pence per mile).
The Tribunal’s views
(a)	The “relocation expenses” (tax year 2003/2004) 
34.	Having considered all of the evidence before it as a whole, the Tribunal finds that the facts claimed by the Appellant as referred to in paragraphs 17, 19, 21 and 22 above are established on a balance of probabilities.
35.	During the hearing, it appeared that a significant issue in the case was whether the 6 year training programme constituted a single employment, or whether each of the rotational appointments that the Appellant undertook as part of the programme was a separate employment.  Having deliberated, the Tribunal finds that this is not a significant issue.
36.	The Tribunal has considered first whether the payments made to the Appellant for excess mileage could be tax exempt under the travel expenses rules (ITEPA ss.337 to 339).  These provisions draw a distinction between a “temporary workplace” and a “permanent workplace”.  Clearly, an employee can have more than one temporary workplace.  The Tribunal considers that it is also clear from the wording of these provisions that, for the purposes of these provisions, an employee can at any given moment also have more than one permanent workplace.  This is clear apart from anything else from s.338(3), (4), and (8), which expressly refer to “a permanent workplace” rather than “the permanent workplace”.
37.	On the facts that have been accepted by the Tribunal, even if the hospital in Winchester was the Appellant’s permanent base, and even if the hospital in Portsmouth was merely one of several rotational placements within a 6 year programme, it remains the case that the hospital in Portsmouth was in tax year 2003/04 “A place which the [Appellant] regularly attend[ed] in the performance of the duties of the employment”.  Accordingly, pursuant to s.339, the hospital in Portsmouth is treated as a permanent workplace and not a temporary workplace if “the tasks to be carried out in the performance of those duties are allocated there”.  Although this issue was not expressly addressed at the hearing, there is no evidence to suggest that when the Appellant was working at the hospital in Portsmouth, the tasks that he carried out in the performance of his duties there were allocated to him by the hospital in Winchester.  Given that the burden of proof is on the Appellant, that is sufficient reason for concluding that it is not established that the hospital in Portsmouth was a temporary workplace.  In any event, the Tribunal considers it quite improbable that surgeon working at a hospital in Portsmouth would be allocated tasks by a hospital in Winchester to be carried out in the performance of his duties in a hospital in Portsmouth which was under a separate NHS Trust.  The Tribunal is satisfied that even if the entire 6 year programme constituted a single employment, for purposes of ITEPA ss.338 and 339, the hospital in Portsmouth was nonetheless a “permanent workplace” in tax year 2003/04.  It follows that the claim for excess mileage was in respect of travel between the place where the Appellant lived and a “permanent workplace”.  This travel was therefore “ordinary commuting” under either or both of s.338(3)(a) or (b), and was therefore not an allowable deduction from earnings by virtue of s.338(2).  
38.	The Tribunal has considered next whether the payments made to the Appellant for “excess mileage” could qualify as removal benefits or removal expenses under ITEPA s.271.  
39.	In order for benefits to so qualify, by virtue of s.272(1)(c), it is necessary amongst other things that the removal benefits or removal expenses fall within one of a list of specified provisions.  The only provision that is potentially applicable is s.281.  A requirement of s.281(1)(c) is that the benefit be for for travel between the employee’s “former residence” and the place where the employee’s new duties are normally performed.  Section 276(2)(a) defines “former residence” as “the employee’s residence before the change”. 
40.	Prior to taking up the 6 year programme, the Appellant lived in Bristol.  When he commenced the programme, he first moved to a place near Guildford for about 6 months.  Payments in respect of excess mileage from there to his place of work are not payments in respect of travel from his “former residence”.  Similarly, payments in respect of excess mileage from Ovington to his place of work are not in respect of travel from his “former residence”.  The Tribunal accordingly finds that the provisions relating to removal benefits or removal expenses are also not applicable to exempt the excess mileage payments from tax.
41.	The Tribunal finds that the payment for excess mileage otherwise falls within the general definition of earnings in ITEPA s.62.  As neither of the exemptions above is applicable, payment for excess mileage is taxable.  The appeal therefore fails to the extent that it relates to the excess mileage payment.
(b)	The “call out expenses” (tax year 2005/2006) 
42.	Having considered all of the evidence before it as a whole, the Tribunal finds that the facts claimed by the Appellant as referred to in paragraphs 23, 25 and 26 above are established on a balance of probabilities.  The only evidence to contradict the Appellant’s evidence of these facts are documents generated by HMRC which record HMRC’s understanding of a telephone conversation with the Appellant.  The Appellant acknowledged that he may not have communicated the facts to HMRC sufficiently clearly, but said that the HMRC understanding of the conversation was not correct.  The Tribunal found the Appellant’s evidence of the fact, and explanation for the inconsistent evidence, to be credible.
43.	The Tribunal therefore finds that the call out expenses were tax exempt up to the amount of 40 pence per mile, in accordance with ITEPA ss.229 and 230.  The Tribunal finds to be correct the HMRC submission that even if the Appellant’s employer paid more than 40 pence a mile, the tax exempt amount is limited to 40 pence a mile.
44.	To the extent that the appeal relates to the call out expenses, the Tribunal therefore allows the appeal in part, and finds that of the £633.88 paid to the Appellant, £478.40 (that is, 1196 miles at 40 pence per mile) is tax exempt. 
Conclusion
45.	For the reasons given above, the Tribunal (a) finds that the payment of £3,416.19 made to the Appellant in tax year 2003/2004 by Portsmouth Hospitals NHS Trust in respect of “relocation expenses” is not tax exempt, and dismisses the appeal to the extent that it relates to the “relocation expenses”; and (b) allows the appeal in part to the extent that it relates to the “call out expenses” and finds that of the £633.88 paid to the Appellant, £478.40 is tax exempt.
46.	This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.   The application must be received by this Tribunal not later than 56 days after this decision is sent to that party.  The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

Christopher Staker

TRIBUNAL JUDGE
RELEASE DATE: 18 June 2010