BOARD AND LODGING ALLOWANCES (Hansard, 8 July 1986)

§ Mr. Wrigglesworth
I beg to move, That the clause be read a Second time.
This clause arises from a case which I have taken up on behalf of a constituent. I have pursued it over a period of years to try to get for him what I believe is proper justice in the legitimate claims that he makes for expenses and which he is taxed upon. My constituent is involved in a long-running dispute with the Inland Revenue. I raise this matter this evening because it has wider implications and interests than merely those of my constituent.
My constituent is a single man and is sent to different parts of the country to work for one or two weeks at a time. His employers have apparently agreed with the Inland Revenue that, where an employee is married, hotel costs can be reimbursed free of tax, but that in the case of a single employee tax and national insurance contributions must be deducted from his expenses, and it also costs the company additional employer's national insurance contributions.
I should have thought that the employee concerned could make a section 189 claim, but the basis of the 253 Revenue agreement is that a single person does not have to maintain a fixed abode, and so is taxable on living expenses which are reimbursed, whereas a married person does and so is not taxable. The concept that a married man must keep an abode and that a single man must not is nonsense. It underlines Ministers' judgments in my correspondence with them.
The present Revenue treatment of this company's case produces farcical results when a married person and a single person are away together on business on an out-of-town job. They both claim expenses but those expenses are taxed differently. Surely the Revenue is wrong not to admit a section 189 claim.
My new clause seeks to make the treatment of single and married people the same in those circumstances. At present people such as my constituent are losing considerable sums from having to pay tax on necessary expenses incurred when they have an abode at home. I see no reason why such people should be treated differently from their married colleagues when they have exactly the same responsibilities of maintaining a home.
I hope that the Minister will be prepared this evening to give some assurance to me, my constituent and many others in the same position that he will reconsider the provisions of the law and, perhaps, accept this new clause so that there may be equality of treatment between married and single men claiming expenses in this way.

§ Mr. Norman Lamont
The hon. Member for Stockton, South (Mr. Wrigglesworth), through the case of his constituent, has certainly uncovered a complicated matter and I for one am grateful to him for raising it. I do not think that his new clause is the right way to tackle the problem for reasons which I shall explain, but I shall say how I think I could approach it constructively, even if I cannot guarantee to solve it.
Under the general rules of schedule E, an employee is chargeable to income tax on all of the remuneration from his employment, including any allowances or reimbursed expenses, except to the extent that he is entitled to an offsetting deduction for expenses incurred.
Obviously the schedule E expenses rule must be strict. An employee may have a deduction only for expenses he "necessarily" incurs in travelling in the performance of his duties, or which he otherwise incurs "wholly, exclusively and necessarily" in the performance of those duties. That means that if an employee necessarily incurs additional expenses of travel or accommodation as a result of travelling in the performance of his duties, or of his being required temporarily to perform those duties at some location away from that where he usually works, such expenses will normally already be deductible under the existing statutory rules. Where, as will usually happen, the employee receives an allowance from his employer to cover those expenses, that allowance will not in such circumstances be taxed on the ground that the employee would be due an equal and offsetting expenses deduction.
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For this reason, the new clause would be superfluous. Indeed, though no doubt the hon. Gentleman did not intend this, it could actually leave some employees worse off. For example, as drafted, the new clause would allow relief for board and lodging expenses only if the employee was maintaining or contributing to the maintenance of a 254 residence in the vicinity of his normal place of work. The hon. Gentleman will see that that could operate to some people's disadvantage.
The schedule E expenses rule is nevertheless a strict one and has been strictly interpreted by the courts. It is well established that relief is not admissible for the expenses that an employee incurs in travelling between his home and the place where he normally works, or for the expense of maintaining a home at or near his normal place of work. The reasoning here — the hon. Gentleman will be familiar with it—is that such expenses are not incurred in the performance of the duties of the employment. Rather they are expenses of a personal nature which simply put the employee in a position to carry out those
Though strict, it is obviously right and sensible that the line should be drawn in that way. Virtually all employees will to a greater or lesser extent incur such personal expenditure in travelling between their home and their place of work, and of course we all incur living expenses wherever we work. In short, the law already makes suitable provision for the deductibility of expenses, including board and lodging.
I gather from the constituency case that he has raised that the hon. Gentleman is especially concerned about the tax treatment of allowances for single employees under a working rule agreement, which are taxed, whereas those paid to married employees are not.
Working rule agreements are drawn up between representatives of employers and trade unions to govern rates of pay and conditions of work in the construction and various allied industries. The Inland Revenue is not a party to the agreements itself, but in view of the high degree of mobility of employees in the industries concerned the Revenue has for many years agreed that payments of certain of the allowances under the agreements—including those for board and lodging—should not be taxed, on the basis that in the generality of cases the employee would be entitled to an offsetting expenses deduction for some or all of the expenses in question. In short, this arrangement has no statutory effect but is simply one of administrative convenience for the benefit of employers, employees and the Revenue alike. It is welcomed by employers and is designed to obviate the need for the many individual expenses claims that would otherwise arise.
One of the allowances is for board and lodging, where the employee is working at a site which necessitates his living away from home. Under the Revenue's practice in respect of such agreements, such lodging allowances paid to a single employee who does not maintain dependants at his permanent home are taxed, whereas those paid to a married employee or to a single person with dependants are not.
The reason for this difference in treatment is that it is clear in the case of a married man or a single man with dependants that, in addition to the cost of his lodgings while away from home, he will continue to incur the expense of maintaining a permanent home for his dependants. The case of a single man without dependants is less clear cut and may be distinguished because he may or may not have continuing responsibilities.
This is an extra-statutory concession, but I quite see that the distinction is somewhat arbitrary. However, if it is to work, the Revenue and employers alike need clear-cut 255 rules and definitions which can be operated in practice and which we do not have to police with too many local inquiries. That is why the line has been drawn in this way.
This is a complicated matter and I have tried to explain the difference between the statutory position and the extra-statutory position and how it is operating. Nothing, as it operates, is denying any taxpayer of any of his statutory rights. In so far as there is a concession, it is obviously a concession which benefits the married person with dependants or the single person with dependants. They are getting a concession. No one is denied any statutory right as a result of the way in which this operates.
When I looked into the matter, I felt uneasy about the point which the hon. Gentleman has raised. I cannot give a clear assurance that there is an easy answer to it, but we shall look carefully at it to see whether there is a practicable way in which this particular feature in the arrangements operated by the Revenue might be relaxed so as to take account of the single employee who does not have dependants living with him but who is, nevertheless, maintaining a permanent home, which, I think, is the precise point at which the hon. Gentleman is getting.

§ Mr. Wrigglesworth
I am grateful to the Minister for rehearsing the background to this matter. I have been through it in correspondence with his predecessor and know it well. I have summed up the basic grievance in my speech which the Minister has come to at the end of his remarks.
The working rule agreement is the basis of the anomaly, but it is intolerable that, as is so clearly demonstrated, when a married man and a single man, both with homes in the same town, go to work in another town together, the single man should be taxed on the hotel accommodation that he must have in order to carry out this duties, while his married colleague is not taxed. He is worse off although he is carrying out his duties at work. That is an intolerable situation which does not apply only to my constituent. It has wider implications for others, which is why I have raised it this evening.
I am grateful to the Minister for saying that he will look at it. It is an arbitrary distinction and I hope that he will find some way of overcoming it, not just in the case of my constituent, under his particular working rule agreement, but in all working rule agreements that apply to other employees in other parts of the country.
I can understand, and I think my constituent understands, that it is to the benefit of the Revenue, firms and employees that arrangements of this sort should operate. It is clearly to everybody's benefit that they should, but not if they give rise to anomalies of this sort.
I have fought to try to have this put right for some years and I plead with the Minister to take action on this quickly so that the anomaly is not continued. I know that he cannot find and announce the solution now, but I hope that he will be able to come to the House soon, having expressed his understanding of the predicament in which my constituent finds himself, and announce that a solution to it has been found.
The Minister having given those assurances, I am pleased to ask leave to withdraw the motion.