Case Study: Exclusivity and Tax Relief


In order to qualify as a deduction for tax purposes, we have to demonstrate that the expenditure was incurred “wholly and exclusively” for the purposes of our business or employment.

We will also need to consider a further criterion: where the expenditure has a duality of purpose.

Tax-Relief

Suits Some But Not HMRC

In a 1980’s case, a barrister claimed for the cost of business suits which she insisted were only used for business purposes. To her delight, the lower courts agreed, but HMRC was having none of it and pursued their case to the House of Lords where the taxpayer’s claim and appeal was dismissed.

The barrister failed to secure her claim as she could not escape the conclusion that although she may have purchased the required “subdued” clothing for her practice, the clothes purchased could have been worn on a private occasion, even though she may have chosen not to do so.

As always this and other related cases, open the door to speculation: when does expenditure meet these stringent rules?

Private Advantage

For example, if the barrister’s suits had carried a visible label – the name of her practice – would this have tipped the balance as she could argue the suit was a uniform and not appropriate to wear on private occasions?

Removing any private advantage may be more difficult than it would appear.

Unfortunately, we are required by legislation to comply with the “wholly and exclusively” rule and if there is a whiff of private advantage to the expenditure, then it will likely be disallowed. HMRC in their instructions to staff say:

You should disallow expenditure on ordinary clothing worn by a trader during the course of their trade. This remains so even where particular standards of dress are required by, for example, the rules of a professional body.

If you have further questions on tax relief, contact us today.


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