Doctor On The Go

The deductibility of travelling expenses for doctors on training rotations is examined by MIKE THEXTON MA, FCA, ATII.

A doctor's training is an extremely arduous process, and one of the procedures that a qualified doctor may undertake is a 'training rotation'. This involves working for several months in a succession of hospitals in order to gain a range of experience.

A doctor on rotation will usually have the successive assignments planned out in advance, and will 'sign up' to the arrangement. There will be a base hospital (or general practice) which will provide some of the training and experience and to which, it is expected, the doctor will return at the end of the period. A trainer at the base hospital or practice will monitor the trainee's progress. During the rotation, the doctor will work elsewhere for substantial periods. There will also be day-release courses to attend.

Expenses

It may be possible to use 'free' accommodation when on call at the hospital, but there will be expenses of travel at the beginning and end of duty, and possibly also extra expenses of subsistence and accommodation in some cases. Will these be allowable? If the journeys from the doctor's home to the various hospitals constitutes business travel, the doctor will be entitled to be paid mileage or other travelling expenses under a dispensation, as well as subsistence and accommodation (the Inland Revenue believes that the deductibility of bed and board goes with travelling). Alternatively, the doctor will be entitled to claim a deduction from salary under section 198, Taxes Act 1988.

Normal commuting

In order to claim a deduction, the doctor must satisfy the conditions in section 198(1A), which allows:

'(a) amounts necessarily expended on travelling in the performance of the duties of the office or employment, or

'(b) other expenses of travelling which –

'In the performance of the duties' is unlikely to be satisfied where the doctor is simply attending the same hospital every day for a period of months (see Parikh v Sleeman [1990] STC 233 and Knapp v Morton SpC 177). The House of Lords decision to allow travelling expenses to a hospital in Pook v Owen 45 TC 571 is regarded by the Inland Revenue as a special case, and would probably not help either. Dr Owen had to be summoned to the hospital by telephone, and this was held to be the start of performing his duties. Regular daily attendance by a doctor on rotation would not meet this condition.

The second part of the section looks more promising. Clearly the expenses will be 'attributable to necessary attendance … in the performance of the duties'. The question is whether the journeys will be 'ordinary commuting'. Schedule 12A, which is in ordinary language and therefore remarkably easy to follow, contains the following logical sequence:

'2 – (1) "Ordinary commuting" means travel between –

Travel between home and a temporary workplace is not ordinary commuting, and can therefore be business travel.

'4 For the purposes of paragraph 2, subject to the following provisions of this Schedule –

This is very promising. Each assignment during a rotation lasts a period of months, almost certainly less than two years; paragraph 5(3) will only apply if the journey to the 'rotation' hospital is substantially the same as the journey to the base hospital. Journeys to and from the base will not be allowed, because that will count as the permanent workplace from which the doctor is temporarily detached to go elsewhere.

Separate contract hitch

However, there is a catch. Apparently, the doctor will often sign a separate contract with each hospital in turn, even though the whole rotation is a pre-planned arrangement organised by the base hospital. The Revenue then takes the view that paragraph 5(1)(b) applies – if each rotation assignment is a separate employment, then substantially all of the time of each of those employments is spent in the same place, and everything is ordinary commuting.

It is unlikely that the hospitals will change their contractual arrangements (as they are independent bodies these days, with some loose connection to the National Health Service) in order to suit the tax position of the poor trainee consultant. So the Revenue will deny a deduction (or dispensation) for substantial quantities of travelling expenditure, even though the doctor is required to incur such expenditure in order to complete the rigorous training programme.

It is rumoured that different Revenue districts have arrived at different treatments for such trainee doctors, but head office is now directing that more consistency is required. As usual, it can be expected that the consistent line is the least generous one: that signing a separate contract is enough to disallow all the expenses.

A way out?

Tax Bulletin 50 provides some food for thought for those advising doctors in this position. It includes a lengthy article about 'Employees sent on secondment to work in the United Kingdom', and discusses the circumstances in which they will be entitled to tax-free payment of all their travelling, subsistence and accommodation costs. Although it is written in the context of foreign workers coming to the United Kingdom, the principles will apply equally to employees sent on secondment within the United Kingdom.

It includes the following discussion of the problem of short-term contracts:

'The place where an employee works does not of itself determine who is his or her employer. Nevertheless, when someone is sent to work at a particular site for, say, 18 months, it is always necessary to consider whether the secondment is part of the duties of a continuing employment or whether it involves taking up a different employment.

'In most cases the position will be straightforward, for example where an employee's contract of employment stipulates from the outset that the employee may be required to move from office to office for different periods in the course of the employment. But there will be circumstances where the position is less clear-cut.

'Whether a particular secondment amounts to acceptance of a new employment has to be determined on a case by case basis taking into account all relevant factors.

'Factors in favour of a new employment would include a separate contract with a different employer, a termination of the previous employment and a major change in employment duties from the previous employment.

'Factors pointing to a continuing employment before and after the secondment would include continuing rights under the contract of employment, such as pension or seniority rights or, in some cases, share scheme participation, and the same employer. In borderline cases we may need to obtain legal advice before taking a view.'

It is interesting that the 'separate contract' is only a factor in favour of a new employment, not a decider. It is significant that 'continuing rights … such as pension or seniority' are indicative of a secondment from a continuing employment. A doctor on rotation has the right to return at the end of the contract to resume a position at the base hospital, and will continue to contribute to the same National Health Service pension scheme throughout. Seniority in the original employment will be gained by completing the rotation.

There will be a single 'agreement', even if it is not a single contract of employment, covering the whole period of rotation, and there will be no substantial change of duties throughout that period. It is common for there to be a single interview leading to the single agreement, possibly attended by representatives from several of the hospitals in the rotation. A central supervising trainer is likely to be responsible for the doctor throughout. Indeed, the paragraph describing the 'clear-cut' situation is quite an apt description of a rotation agreement.

Conclusion

Although the Revenue apparently considers that travelling expenses of doctors on rotation are ordinary commuting because they sign separate contracts with each hospital in turn, there is a strong argument that the pre-planned nature of the rotation gives them a continuing employment with the base hospital from which they are seconded. Provided that the journey to the rotation hospital is substantially different from the journey to the base hospital, Tax Bulletin 50 suggests that the doctor should be entitled to claim a deduction under section 198 for all home-to-work travel, together with necessary accommodation near the site of the secondment, and subsistence incurred during the travel and stays away.

The rules have been the same since 6 April 1998, so a claim would be possible for omitted expenses for 1998-99 and 1999-2000, as well as 2000-01 and the current year. It is even possible to argue that a rotation would have satisfied the harsher rules on travelling expenses which existed before April 1998, although it may be hard now to establish the figures.

Mike Thexton is a principal with Thexton Training and a leading lecturer on taxation matters.

Issue: 3819 / Categories: