A home from home: Tax relief for accommodation costs
Most tax cases seem to involve complicated avoidance schemes these days and so it's good when something more routine comes along. And even better when it concerns someone famous! In a recent tax case, the spotlight fell on accommodation costs incurred by Tim Healy when appearing in Billy Elliot in London. If you don't know who Tim Healy is the judge summed him up quite nicely in the following terms: Mr Healy is a professional actor "well known for parts which have involved use of his "Geordie" accent".
Rather than stay in a hotel for the duration of his contract (nine months), Mr Healy rented a flat and claimed relief for the rent paid against his income as a self-employed actor. HMRC rejected this on the basis that the expenditure was not incurred wholly and exclusively for the purposes of his trade; the flat also providing Mr Healy with warmth and shelter. A lower tax court (the First-tier Tax tribunal) found in favour of Mr Healy, ruling that relief was due as Mr Healy clearly resided elsewhere (Cheshire) and was not seeking a home in London. HMRC appealed to a higher tax court, the Upper Tribunal.
Before the higher court, HMRC argued that relief was not due because the flat had been rented for so long (9 months). Had HMRC been successful, this would have been bad news for all sole traders and partners who use rented accommodation rather than hotel facilities for medium or long-term contracts. Fortunately, the higher court rejected this argument finding that the issue could only be decided by what was in Mr Healy's mind when he entered into the rental agreement. The case was then sent back to the lower tax court to establish just that!
This story has yet to come to an end and perhaps there will be a few more twists and turns to come. However, it seems to me that Mr Healy will prevail in the end as: the rental contract lasted for the term of his engagement in London and no longer; he maintained a home elsewhere; and the rental accommodation was cheaper than equivalent hotel facilities. Anyone about to enter into a similar arrangement should take advice as to whether relief is likely to be due in light of the Healy case.