A PhD student provides occasional legal assistance. He reports his income as income from work. He moves to another house and claims the flat-rate moving expenses deduction of €7,750. The Tax Office refuses the deduction on the grounds that the move is not of a business nature. How does the court rule?
Main rule
In principle, there must be business expenses. The relocation must have a business character. A move for personal reasons does not result in deductible costs. In that case, the flat-rate moving expense deduction is not applicable either. When the move is necessary for the work or when the main purpose of the move is to limit future costs of the work, the moving expenses are considered to be business expenses.
As this move is not aimed at reducing the future costs of the work, the issue here is whether the move was necessary for the performance of the work.
Review
According to the doctoral student, he moved because of noise pollution. He comes with a report of an acoustic survey. The report says when the upstairs neighbour moved in and that all sorts of things were done, which also resulted in improvement, but still not enough.
In doing so, the court held that the doctoral candidate had not made it plausible that the move was necessary for the performance and continuation of the said work. The doctoral candidate has not argued sufficiently to make it plausible that the noise nuisance was such that he was unable to perform his work. The doctoral candidate has acknowledged that the said noise pollution restricted his enjoyment of his home. The mere assertion that, in addition, it was not pleasant to work at that location is insufficient to give the move a businesslike character.
The judge weighed in that the new home was bigger and more attractive on many levels. This also indicates that the move is mainly based on personal motives and that the expenses were not incurred with a view to work.
Judge's ruling
The PhD student does not make it plausible that he moved with a view to the business interests of the work and that he incurred expenses for this purpose. As the move is not business-related, the related expenses, including the claimed deduction of the lump sum of €7,750, are not eligible for deduction. The right is for the Inland Revenue.
Tip: Not every removal of an entrepreneur or recipient of income from work entitles the entrepreneur to deduct removal expenses or the flat-rate removal expenses deduction. The move must be of a business nature, of which the entrepreneur/beneficiary has the burden of proof. However, business character is automatically assumed if the entrepreneur/result-beneficiary moves within two years of the relocation of the business and the move reduces the distance between his home and the place of establishment of the business by at least 60% while until that move, the distance between his home and the place of establishment of the business was at least 25 kilometres.
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