Travel Expenses Under Scrutiny: A Nurse & Nwaneri v HMRC

The rules governing tax relief for travel expenses continue to be a frequent source of dispute between taxpayers and HMRC, particularly where employees undertake assignments at multiple locations. Two recent First-tier Tribunal decisions, A Nurse v HMRC and Nwaneri v HMRC, provide useful insight into the application of the travel expense provisions contained in Part 5, Chapter 2 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003).

View the full case for A Nurse v HMRC here and the full case for Nwaneri v HMRC here.

Although the facts of the cases differ significantly, both required the Tribunal to consider whether the journeys undertaken by the taxpayers constituted ordinary commuting or qualifying business travel. The decisions reinforce the importance of correctly identifying a permanent workplace and maintaining sufficient evidence to support any expense claims. They also demonstrate that the question of whether an expense is deductible is separate from the issue of whether penalties should be imposed.

The Legislative Framework for Travel Expenses

As a brief reminder, under section 338 ITEPA 2003, tax relief is available for travel expenses if the employee is obliged to incur and pay them as a holder of the employment and they are attributable to the necessary attendance at a place in the performance of the employee’s duties or for travel to a ‘temporary workplace’ (as defined under section 339 ITEPA 2003).

Ordinary Commuting Does Not Qualify for Tax Relief

However, no relief is available for ordinary commuting, which is broadly defined as travel between an employee’s home and a permanent workplace.

Permanent Workplaces and Temporary Workplace Rules

A workplace will generally be regarded as permanent if an employee attends it regularly in the performance of their duties and it is not a temporary workplace (as defined). The distinction between a permanent and temporary workplace is often complex and a key factor in determining whether travel expenses qualify for relief.

The following cases provide recent examples of the Tribunal’s approach to these principles.

A Nurse v HMRC: Travel Between Home and Permanent Workplaces

This case involved an NHS bank nurse, effectively working under a zero-hours contract directly engaged by the NHS, who had been misled by a work colleague to make excessive travel claims on her behalf. The First-Tier Tribunal (“FTT”) decided to anonymise the decision to risk any retribution from the work colleague involved. The claims were submitted for travel expenses relating to journeys between the nurse’s home and her places of work.

Nondeductible Travel Expense

HMRC subsequently opened an enquiry and concluded that the travel expenses were not deductible. The journeys represented ordinary commuting between the Appellant’s home and her permanent workplaces and therefore were not eligible for tax relief.

The First-tier Tribunal agreed with HMRC’s position. The Tribunal found that the nurse’s attendance at the relevant workplaces was sufficiently regular and ongoing for them to be regarded as permanent workplaces. As a result, the travel did not qualify for relief under sections 338 and 339 ITEPA 2003.

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Why the Penalty Position Was Different

However, the more interesting aspect of the case concerned the penalties imposed by HMRC. The Appellant argued that she had not knowingly submitted the claims and had relied on representations made by a colleague who had assisted with the process. Evidence showed that she had been misled regarding the nature of the claims being submitted and did not fully understand that travel expenses were being claimed.

Why the Discovery Assessments Were Upheld

With that said, the Tribunal highlighted that the Appellant did not take reasonable care in the matter primarily due to providing her login details for her Government Gateway account to the work colleague and had said to the Tribunal that she was “surprised by the size of the repayments”. Due to this, the Tribunal upheld the discovery assessments and dismissed the appeal.

Why the Penalties Were Reduced

With regard to the penalties, the Tribunal accepted that the inaccuracies in the returns were not the result of careless or deliberate behaviour by the taxpayer. They allowed for a special reduction on the basis of the following points:

• The Appellant was a victim to someone preying on her naivety,
• The fact that the Appellant suffered a 20% fee that was paid to the work colleague. The Tribunal in this case also highlighted that penalties should not be considered by HMRC to be a “revenue raiser” and should operate as a financial deterrent,
• The Appellant was being further penalised by HMRC’s interest rates and
• HMRC were somewhat to blame due to the fact that the repayment system authorises repayments which ought to have flagged the excessive claims.

Due to reasons set out above, the penalties were cancelled.

Key Lessons from A Nurse v HMRC

The decision serves as a reminder that:

• Travel between home and a permanent workplace will constitute ordinary commuting and will not attract tax relief.
• Taxpayers remain responsible for claims submitted on their behalf and should not share personal login details without seeking professional advice.
• Penalties may be successfully challenged where a taxpayer can demonstrate that inaccuracies arose through deception, misunderstanding or circumstances beyond their control rather than careless or deliberate conduct.

The case also highlights the risks associated with aggressive tax refund agents and claims management companies that encourage employees to submit expense claims without fully considering the statutory requirements.

Nwaneri v HMRC: Locum Doctors, Intermediaries and Evidence

The decision in Nwaneri v HMRC concerned a locum doctor who was engaged via an intermediary to provide services to 2 NHS hospitals. During the engagements, Nwaneri claimed substantial travel and subsistence expenses of £162,120 during the tax years 2019/20 to 2021/22. This related to journeys between the taxpayer’s home and the 2 NHS hospitals where he carried out locum assignments.

Request for Evidence

HMRC challenged the claims and requested supporting evidence, including contracts, mileage records, receipts and bank statements. The documentation provided was limited and a number of significant inconsistencies emerged during HMRC’s review.

How Section 339A ITEPA Applied to the Intermediary Arrangement

As the claims were via an intermediary, HMRC considered the specific travel expenses legislation set out under section 339A ITEPA 2003. In particular, due to section 339A ITEPA 2003 (2), each of Nwaneri’s assignments were treated as a separate employment. As such the period of the employment was the period of the assignment and, ultimately, it was shown that Nwaneri did attend the workplaces for all or almost all of the assignment.

Why the Hospitals Were Treated as Permanent Workplaces

Consequently, the hospitals where he worked were found to be permanent workplaces rather than temporary workplaces and the mileage expenses were not deductible. Also, for the purposes of the subsistence expenses, the claims were not considered sufficient to satisfy the restrictive test of being “incurred wholly, exclusively and necessarily” in the performance of the duties of employment.

Why the Expense Claims Failed

Further to the above, there were issues identified regarding the mileage claims given they exceeded the recorded mileage of the taxpayer’s vehicle resulting in overstated mileage of approximately 30,000 miles. There were also calculations based on working patterns that appeared impossible as the claims for mileage and subsistence for the 2019/20 tax year suggested that that Nwaneri had worked 9 days a week for 52 weeks of the year. The claims were also excessive as they represented a significant percentage, in some cases more than 50%, of Nwaneri’s income.

Not Enough Evidence

In summary, the Tribunal found that the taxpayer had failed to provide sufficient evidence to demonstrate that the expenses had been incurred or that they qualified for tax relief. The Tribunal also upheld HMRC’s penalties, concluding that the inaccuracies were deliberate. The scale of the unsupported claims and the deficiencies in the evidence persuaded the Tribunal that the taxpayer’s conduct went beyond simple error or misunderstanding.

Key Lessons from Nwaneri v HMRC

The case highlights several important points:

• The temporary workplace rules are highly fact-sensitive and require careful analysis of the nature and duration of each engagement.
• Taxpayers must retain adequate records to support all expense claims.
• HMRC is likely to challenge claims that appear excessive or unsupported by evidence.
• Significant inaccuracies may result not only in the denial of tax relief but also in substantial penalties where deliberate behaviour is established.

The decision reinforces the importance of maintaining detailed mileage logs, receipts and contractual documentation, particularly where employees undertake multiple assignments across different locations.

Comparing the Outcomes of Both Travel Expense Cases

Although both cases involved disallowed travel expense claims, they reached markedly different conclusions on penalties.

Canceling Penalties in A Nurse v HMRC

In A Nurse v HMRC, the Tribunal accepted that the taxpayer had been misled and had not acted carelessly or deliberately. While the tax relief was denied, the penalties were cancelled.

Upholding Penalties in Nwaneri v HMRC

In contrast, Nwaneri v HMRC involved extensive claims that could not be substantiated and evidence that the Tribunal considered implausible. The taxpayer was therefore unsuccessful both in claiming relief and in challenging the penalties.

The contrast illustrates an important principle: the eligibility to claim tax relief on expenses and the taxpayer’s behaviour are separate issues.

What These Cases Mean for Employers, Agencies and Umbrella Companies

These two decisions provide a timely reminder that the travel expense rules remain an area of significant HMRC scrutiny and we may start to see more such cases through the tribunals as umbrella companies and agencies are likely to avoid reimbursing travel and subsistence expenses further following the introduction of the Joint and Several Liability rules. Therefore, it is imperative to ensure that claims are supported by robust evidence and that careful consideration is given to the distinction between permanent and temporary workplaces.

Why the Preparation of Expense Claims Matters

The cases also demonstrate the importance of reviewing not only the technical validity of expense claims but also the circumstances in which they are prepared and submitted. While genuine mistakes may not always result in penalties, unsupported or exaggerated claims can expose parties to significant financial consequences.

HMRC’s Continued Focus on Expense Claims

As HMRC continues to focus on expenses claims, these decisions offer valuable guidance on both the substantive travel expense rules and the behavioural standards expected of taxpayers seeking tax relief.

Speak to Chartergates About Expenses Legislation

If you would like to discuss any matters relating to expenses legislation, please get in touch with the Chartergates team.

Disclaimer

Chartergate Legal Services Ltd has drafted this update to provide you with a general overview of the relevant law and developments at the date of sending only. This update is provided as a general overview and should be taken as such. It is not a substitute for professional advice that is specific to your circumstances and should not be relied upon as such.