[2010] UKFTT 429 (TC)

TC00700

Appeal number: TC/2009/13975

Income Tax -  Schedule D – Journalist and author – Expenses – Whether premises costs incurred whilst working and writing a book qualified for a deduction against income from the business – Section 34 Income Tax (Trading and Other Income) Act 2005

FIRST-TIER TRIBUNAL

TAX 

	CHRISTOPHER HUHTALA	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

		TRIBUNAL: 	MRS. S. M. G. RADFORD (TRIBUNAL JUDGE)					MR. ROGER WHITE

Sitting in public at Holborn Bars, London EC1N 2NQ on 27 July 2010

Mr D. Hamilton for the Appellant and the Appellant in person

Mr C. Vallance for the Respondents

© CROWN COPYRIGHT 2010

DECISION

1.	This is an appeal against the closure notice issued by HMRC under Section 28A(1) & (2) of the Taxes Management Act 1970 (“TMA”) for the year ended 5 April 2007 which brought into charge an additional £12,800.53 following an enquiry under Section 59A TMA.
2.	The main disagreement in the case centred on whether relief was due for an amount of £10,000 which is explained in more detail below.
Background and facts
3.	The Appellant is a journalist who is self employed and produces a rolling news programme on the internet. As the income from this relies on the customers who advertise on his web site it is essential that he works every day and when he goes on holiday he takes his work with him.
4.	He is also an author and has had several books published on digital television, writes articles for newspapers and moderates at conferences.
5.	He is now 64 and would like to be thinking of retirement but in the last few years with the massive consolidation in satellite television his client base has evaporated. There is little money in writing articles but there is in writing books. 
6.	He has a boat which he used to keep moored at Bray but which he decided to exploit by writing a book about the Thames complete with suitable original photographs. He took his boat to Chiswick, St Katherine’s Dock etc to accomplish this and hopes to get it published in time for the London Olympics.
7.	Having completed his project on the Thames he turned his attention to Europe. He had read two books written by an eccentric from his narrow boat “Narrow dog to Carcasonne” and “Narrow dog to Indian River” and then spoke to Peter Mayle (author of “A Year in Provence”) in order to plan his project which was to write a book called “A Year on a Pontoon” which would reflect life on a French pontoon.
8.	He wanted to be somewhere busy in order to obtain a selection of little stories about those persons who frequented the pontoon and so hired moorings at Port Grimaud and arranged for his boat to be transported there from 2006. The raw material for the book is now complete and he will cease his position on the pontoon this month.
9.	The issue in dispute was whether or not relief was due in respect of a round sum amount of £10,000 for expenditure claimed for moving, mooring and living on the boat in the South of France (hereinafter “the premises costs”). 
10.	On 7 May 2008 the Appellant was notified that an enquiry under Section 9A of the Taxes Management Act 1970 (“TMA”) was to be undertaken into his 2006/2007 tax return.
11.	Agreement was reached between the parties on the deductions claimed within the self employment pages of the return with the exception of a claim for a deduction for premises costs of £10,000.
The Law
12.	Section 34 of the Income Tax (Trading and Other Income) Act 2005 states: 
Expenses not wholly and exclusively for trade and unconnected losses 
(1) In calculating the profits of a trade, no deduction is allowed for— 
(a) expenses not incurred wholly and exclusively for the purposes of the trade, or 
(b) losses not connected with or arising out of the trade. 
(2) If an expense is incurred for more than one purpose, this section does not prohibit a deduction for any identifiable part or identifiable proportion of the expense which is incurred wholly and exclusively for the purposes of the trade. 
Appellant’s Submissions
13.	The Appellant submitted that the expense was wholly necessary in the interests of veracity in order to write his book. Additionally whilst he was doing so he was keeping up with his other work.
14.	A letter from the Appellant’s representative containing a detailed breakdown of the total cost of foreign premises was produced to the Tribunal. This breakdown of costs was mitigated by fifty percent to reflect personal use and in order to meet the wholly and exclusive test.
HMRC’s Submissions
15.	Mr Vallance submitted that the test was whether the requirements of Section 34 Income Tax (Trading and other Income) Act 2005 had been met and the expenses incurred wholly and exclusively in the course of carrying on the Appellant’s trade.
16.	He contended that in this case the test had not been met. The cost of general accommodation was not in general an expense incurred wholly and exclusively for business purposes. It was a normal cost of living incurred by everyone and not as a result of trading.
17.	He referred to the case of Mason v Tyson [1980]STC 284 in which Walton J backed the wholly and exclusive argument and also to some extent the question of duality of purpose.
Findings 
18.	The Tribunal found that the Appellant had not proved his case. Whilst accepting that the Appellant worked long hours from his boat whilst he was in France and needed to be in France on his boat to write his book, the expenses incurred had a duality of purpose. The Appellant and his wife also used the boat as their home and a place to sleep thus the premise expenses were not wholly and exclusively for the purpose of the Appellant’s business as a journalist and writer.
19.	The legislation did not allow for a fifty percent split of the costs to allow for personal use. Unless the costs are incurred wholly and exclusively for the business they are all disallowed.
Decision
20.	The appeal is dismissed.
21.	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.

MRS.S.M.G.RADFORD

TRIBUNAL JUDGE

RELEASE DATE: 13 September 2010