No evidence of mileage: No deduction allowed

In Derek Storey v HMRC [2021] TC08090, the First Tier Tribunal (FTT) denied the taxpayer’s claims to deduct employment-related expenses owing to a lack of evidence to support them.

Mr Storey, an employed scaffolder, submitted unsolicited tax returns to HMRC in June 2017 for the 2014-15, 2015-16 and 2016-17 tax years, claiming deductions totalling £31,890 from employment income.  

• HMRC opened an enquiry into each return, requesting evidence of the expenses claimed and detail of how they qualified as allowable expenses.
  • After providing a schedule of mileage and expensed items, Mr Storey’s agent advised no further information could be given: mileage was claimed to the best of Mr Storey’s memory.   
• HMRC issued closure notices, assessing Income Tax of £12,998:
• • Omitted Car and Car fuel benefits were added to the 2015-16 return.
  • Mileage claims calculated at the Authorised mileage rates were removed, there being no evidence to support them.
  • Subsistence expense claims of £1,875 per year were denied as it was not possible to establish that there was any Allowable travel.
  • A Flat-rate allowance of £140 per year was allowed in respect of tools. No receipts had been provided.
  • Accountancy fees were disallowed as they were not incurred in the performance of Mr Storey’s duties.
• On the basis that the disclosure was prompted and Mr Storey had been careless, a Penalty of £2,340 was charged.
• On review, HMRC upheld their decision. Mr Storey appealed to the FTT.

The FTT agreed with HMRC’s decision, finding that:

• It was claimed that 60,000 business miles were driven in Mr Storey’s personal car between April 2015 and June 2017, but the MOT records for the vehicle showed 38,458 miles being travelled in the period.
  • Mr Storey had use of a company vehicle in this time. No explanation was given as to why he used his own vehicle instead.
  • Mr Storey’s mileage ‘log’ only recorded monthly totals, not individual journeys or dates.
• As no alternative evidence of business journeys was provided, it was not possible to conclude what mileage was undertaken by Mr Storey in the performance of his duties of employment: no deduction could be allowed. 
• No evidence of subsistence was provided or kept, nor was there proof of temporary work locations. There was no evidence of costs being incurred on tools. No related deductions could be allowed. 

The FTT expressed concern that HMRC had not published detailed guidance for employees on how to keep records and the types of evidence that should be submitted by employees in this situation, who may have allowable expenses. 

In the absence of such guidance, it was not possible to apportion blame for carelessness entirely to Mr Storey as he may not have known the level of record-keeping that would be expected of him.

• The FTT suspended the penalty for carelessness, subject to the condition that the remaining tax liability was settled forthwith.

Useful guides on this topic

Travel (summary for employees)
What expenses can your employer reimburse? How might travel expenses affect income Tax and National Insurance Contributions? What journeys are allowable for tax relief?

Authorised mileage rates (own vehicle)
How much can you claim for the costs of business travel? How much can be reimbursed by an employer towards the costs of qualifying business travel?

Clothing
Can an employee claim tax relief on the cost of clothing? Can employers provide clothing? How are claims made? 

Penalties: Errors in Returns and Documents (subscriber version)
What penalties apply if you make an error or mistake? How are penalties calculated? How do you check penalties? What can you do if you receive a penalty?

Subsistence (employees)
This is a guide for employees: can I claim tax relief for subsistence? Subsistence is the tax term for food and drink. 

External link

Derek Storey v HMRC [2021] TC08090