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Kunjur: No magical entry to tax breaks – Tax


Kunjur: No magical access to tax breaks

November 04, 2021

Mount Kaprow Lewis

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The Jayanth Kunjur case deals with the old problem of tax breaks for employees who work from home. The law is tough but clear. But the case has some notable features.

Mr. Kunjur was a dentist who lived and worked in Southampton. He wanted to be an oral surgeon. This required him to take up employment in London for a period of four years from October 2012 to October 2016.

Daily trips between Southampton and London were impractical as this would have meant a 17½ hour working day. In any case, Mr. Kunjur had to be away from the hospital within 30 minutes while he was on call.

As a result, Mr Kunjur rented “modest accommodation” in Colliers Wood and stayed there during the week (and one in six weekends when he was on call). His family stayed in Southampton.

When filing his tax returns for those years, Mr Kunjur, on the advice of his accountants, asked for a tax reduction on the cost, which came to nearly £ 40,000 for the period.

There were a number of reasons why the ‘Travel Expenses’ rules could not reduce costs. The main reason was that working hours in London were longer than the regulations allow. So the only way to remedy this was that they arose “entirely, exclusively and necessarily in the performance of the duties of the employment relationship”.

It’s an extremely tough test. The keywords are “necessary” and “in”. The first limits relief to expenses necessary for the work, in the sense that every person doing the work would inevitably be required to bear the same expenses (or at least such expenses). The second is expenses incurred in actually doing the job (as opposed to enabling yourself to do it).

From that point of view, Mr. Kunjur’s claim was hopeless.

Nonetheless, the court ruled partially in its favor, stating that the test had been fulfilled in relation to part of the expenditure, this part “with reference to the time that Mr Kunjur spent with the advice of the accommodation during his informal and formal periods On-call service “. Unfortunately for Mr. Kunjur, it is difficult to see how this decision could be upheld should HMRC appeal.

In the penalty shootout, Mr. Kunjur was more lucky: and rightly so.

HMRC believed that Mr Kunjur was not exercising reasonable care in seeking discharge (on the advice of his accountant, remember) and was therefore subject to a penalty. According to the HMRC, he should have consulted the guidelines of the HMRC, which would have made his error clear.

Fortunately, and quite rightly, the Tribunal got none of it. In the opinion of the tribunal, the legal review was “particularly difficult” (which is difficult to contradict, since the tribunal itself was wrong!) And “counterintuitive”: Mr Kunjur could rely on the advice of his advisors and was not obliged to give this advice to check.

But there’s a footnote on this case that could cast doubt on the wisdom of relying on HMRC as the self-proclaimed epitome of accuracy.

Readers will recall that the cost of lodging was just under £ 40,000. The tax at stake could not have been more than £ 16,000.

The maximum penalty for negligent error is 30% of the tax at stake, and in practice it will usually be well below – usually 15-20%. But the fines HMRC wanted to impose amounted to over £ 7,500. It looks like HMRC calculated the penalties as a percentage of expenses rather than tax: a fairly fundamental mistake that no one at HMRC seems to have discovered (or, worse, someone at HMRC discovered but not corrected) . . Bad show.

The content of this article is intended to provide general guidance on the subject. Expert advice should be sought regarding your specific circumstances.


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