The comments on motoring expenses have cleared up two issues for me.
Whenever I have trained people on self-employed expenses I have admitted that I couldn’t say for sure whether a vehicle is “equipment and machinery” for the purposes of allowing capital repayments as an expense. It has always seemed to me to be a borderline issue, but this decision is clear authority for saying that it is equipment/machinery and therefore capital repayments on a replacement loan are allowable.
The other issue that the case clears up, at least to some extent, is that of flat-rate expenses on an item that has part business and part domestic use. I have always said that, if you wanted to be ultra-accurate, you could argue that it costs the same amount to rent a telephone line or pay car tax whether you use the vehicle/phone for work or not – it doesn’t cost you anything extra in line rental to make business calls and if you were not running a business you would still have a telephone and still have to pay exactly the same line rental. Same goes for car tax, maybe insurance although you might have a higher premium for certain kinds of business use. But the Commissioner allows the apportionment of flat rate charges according to the percentage of business use. I am not 100% convinced by this, and I suspect that a more detailed counter-argument might have persuaded him that flat rate charges are flat rate charges, end of. But apportionment is now enshrined in a decision and so some small amendments to my self-employment notes are called for.
I too found the rent comments interesting. To the extent that the size-restricted CRR exceeds the size-restricted LRR, the claimant has simply chosen an above average neighbourhood or vicinity and that is a personal cost, not a business one. But to the extent that the full rent exceeds the CRR, that reflects the cost of renting an extra room by comparison with the cost of renting a notional smaller but otherwise identical property. I think that part of the decision is well-reasoned.
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