Difference of opinion

Grolschevik

Hi lads,

Here's a question that I came across. Which of these interpretations of a sole trader’s travel expenses is (more) correct?

From: <http://www.boards.ie/vbulletin/showthread.php?p=78859500>

View 1:
"In computing the income of a trade or profession for tax purposes, no sum is allowed to be deducted for –
(2) any sum not wholly and exclusively laid out for the purposes of a trade or profession,
(2)(a) any sum expended for a private or domestic purpose," (and it continues but that's the relevant part).

So, you can claim any motor or travel expenses that you can prove were wholly and exclusively incurred for the purpose of your trade.

One must ask the question, are the costs incurred by a sole trader in getting to a client's place of business
a) expended for a private or domestic purpose, or
b) wholly and exclusively for the purpose of the trade.

Since you would not have undertaken the journey except for the fact that you were conducting your trade, then it can't be argued that the journey (and associated costs) were for private or domestic purposes, and the expenditure was incurred purely for the purpose of getting the business of your trade done.


View 2:
The question is can the journey from your home to the site be considered a business journey (allowable) or part of the commute to work (not allowable).

It is a principle of taxation that the taxpayer decides where they want to live and where they want to work and for that reason a commute is never allowable as a deduction and is not incurred wholly and exclusively for the purpose of trade. It is incurred because they have chosen to live remotely from where they work.

If 95% of the work that you do is at the site it would suggest that this is your normal place of work/business and the trip from home to the site is in fact a commute and not allowable.

The question re View 2:
That's not an interpretation I've ever seen imposed on a sole trader. In practice a sole trader (say a typical tradesman) tends to register their home address as their business address, and generally just claims a proportion (usually 1/3 or 1/2) of their total motoring expenses, by recording all of the expense in the accounts and doing an addback for the private element. I don't think I've ever seen it challenged in an audit (unless the claim was way out whack with the turnover or nature of the trade).

I think this is one area where there actually can be a definite benefit to sole trader status.

Shane732

I got bored reading the comment.

From the quick read I think you're getting at the following situation:

An employee can't claim the expense of travelling from home to his normal place of business. Furthermore, if an employer covers the cost of an employee getting from home to his normal place of work it is considered a perquisite and within the charge to BIK. However, a sole trader is allowed claim the cost of travelling from his home to a client's location as an allowable expense.

If so, then yes that is the case.

Grolschevik

So, say, a self-employed plumber driving his van to different client sites could claim travel expenses, but, say, a self-employed programmer working on-site at a client's premises on an ongoing basis couldn't?