A special commissioner decided that the costs incurred by a trainee accountant on training courses and materials to enable him to qualify were not expenses incurred wholly, exclusively and necessarily in the performance of the duties of his employment with his firm so that they were not deductible in determining his taxable income.

Facts

The taxpayer was a chartered certified accountant. Before he qualified he was employed by a firm of chartered accountants. The terms of his contract with the firm obliged the taxpayer to incur payments in respect of course fees and reference materials to enable him to qualify. He made those payments and argued that they were incurred wholly, exclusively and necessarily in the performance of the duties of his employment with the firm within ITEPA 2003, s. 336(1) and accordingly that they were deductible in determining his taxable income.

The taxpayer, in his self-assessment returns for 2004–05 and 2005–06, made deductions of £2,491.69 and £2,590.50. The Revenue took the view that those expenses were not deductible and made amendments to those returns disallowing the deductions. The taxpayer appealed against those amendments.

Issue

Whether the sums were incurred wholly, exclusively and necessarily in the performance of the duties of the taxpayer's employment.

Decision

The special commissioner (Charles Hellier) (dismissing the appeal) said that it was a necessary condition for deductibility that the expenses were incurred in the performance of the taxpayer's duties. That was a mixed question of fact and law.

The first step was to determine what was the nature of the job before deciding whether what was done was in the course of the job, or was merely enabling or improving. However, one had to steer clear of determining the nature of the job by reference merely to practical matters and by reference to core duties. A valuable insight into the nature of the job might be obtained by asking what activities were paid for. There might be a difference between the activities which were paid for, and those which were required as a condition of the employment.

In the present case, certain factors pointed away from the attendance at the courses being one of the duties for which the taxpayer was paid (or something required by the nature of his job). Some of the courses took place partly on Saturdays and he was not paid for attendance on Saturdays. The staff handbook indicated that study leave could be granted in the discretion of the firm: it was described as ‘leave’, i.e. in the nature of time away from his duties. Moreover, there was no prescription as to what training should be done when. The requirement to attend training did not alter the fact that paid leave to attend the courses was discretionary.

In all the circumstances, attendance at the courses was not in the performance of the taxpayer's duties. Further, the fact that the taxpayer was obliged to attend courses by his contract and that he could be dismissed if he did not, did not lead to the conclusion that the attendance was part of the nature of his job. The taxpayer was a trainee accountant. He was not paid for attending the courses, but for his work in the firm's business.

Accordingly, the nature of the taxpayer's job did not require the expenditure on the courses even though it enabled him to do the job better (with consequent benefit for himself and the firm), and even though attendance was required by his contract; and therefore the cost of attendance was not incurred in the performance of the duties of his employment (Fitzpatrick v IR Commrs [1994] BTC 66; 66 TC 407 considered).

Even if the expenditure had been incurred in the performance of the taxpayer's duties, it would have been difficult to conclude that it was exclusively so incurred. The taxpayer would have found it difficult to obtain his qualification without the courses and at least to some extent it must have been that the expenditure was incurred for the purpose of getting that qualification and thus not exclusively incurred in the performance of his duties.

(2008) Sp C 671.
Decision released 4 March 2008.