When working away from home an employee may find it more cost-effective to rent a flat or apartment rather than book a hotel if the arrangement is for any duration. A case that involved Tim Healy, the actor, helps to shed some light on the tax deductibility of this expense. In this case, Mr Healy’s case fell flat because, although working away from home whilst appearing in a play in London, he deliberately rented a three-bedroom flat. This was because he wanted to be able to accommodate visitors. On this basis, it failed wholly and exclusively for the purpose of the trade as he had taken a larger than necessary apartment than he needed. The fact that the cost was similar to those of a hotel were irrelevant.
Generally, however, if a flat is rented for your own work the costs should be allowable. Each case must be considered on its own merits as there are no hard and fast rules. Claims for long periods are likely to attract more scrutiny.
In the Healy case, HMRC had argued that travel expenses must be only for a brief period, but the tribunal accepted that the travel expenses were deductible. The case was lost by the taxpayer because it failed the wholly and exclusive test. That does not mean that family and friends cannot visit you in your flat whilst you are working away, it was the intention to procure a larger than necessary flat to do so that lost the case in this instance.
The case reinforces an important point in that an expense may be incurred for the purpose of the business but if it is unnecessarily embellished the whole expense can fail to be allowable since it will fail the wholly and necessarily incurred test.