The test of “incurred wholly, exclusively and necessarily in the performance of duties of employment” was the subject of this case.

The taxpayer, an employed accountant, claimed a deduction for business travel and subsistence expenses and other related expenses in her 2007/2008 UK tax return. HMRC disallowed a deduction for the expenses claimed on the basis they did not fall to be allowed under the specific legislation as set out in ss336-338 ITEPA 2003.

Decision

In reaching a decision, the Tribunal focused on the tests in s 336(1)(b) ITEPA 2003, which provides that the duties of the employment must be such as to require the incurring of the expenditure and the requirements under s 337(1)(a) ITEPA 2003 which provided for a similar test.

The tribunal held it was necessary to examine whether the specific terms of the employment, whether written or oral, required the taxpayer to incur the expenditure. The taxpayer's contract of employment and Employee Handbook make no mention of overseas travel or conferences. The indications in her employer's letters did not; in the tribunals view establish it to be a requirement of her employment that she should attend overseas conferences.

The tribunal did not consider that the test in s 336(1)(b) was satisfied, as the taxpayer was not subject to a specific requirement to incur the expenditure “wholly, exclusively and necessarily in the performance of the duties of the employment”. It followed that various associated expenses were disallowed on the same basis. The travel costs, including the travel insurance and the emergency back to work flight claimed by the taxpayer, also did not meet the similar tests in s 337(1)(a) and (b).

The cost of the special clothing for the conference was claimed as a deduction by the taxpayer and this cost was also disallowed by the tribunal, both on the statutory language of s 336(1)(a), and on the more general basis confirmed by the House of Lords in Mallalieu v Drummond; generally speaking, clothing involves a duality of purpose, and therefore cannot meet the “wholly, exclusively and necessarily” test. The tribunal considered that for specialised clothing provided by an employee to meet the tests would require the form of clothing to be extremely specialised and for all practical purposes to be unusable (and unused) outside the context of the employment. In this case, the clothing did not fall within such exceptional circumstances.

Considering the taxpayers claim for a deduction for “gifts for conference” it was held that such expense were not allowable as the taxpayer was not required by the terms of her employment to attend the conferences, and the tribunal noted “it is clear that the gifts were not connected with the employer's trade, profession, business or vocation”.

Similarly the taxpayer's claim for “Dinner for client's bookkeeper and student IT help” were disallowed under s 356 ITEPA 2003, as set out above.

The taxpayer also sought a tax deduction for a number of sundry costs incurred when working from her private residence. Again the tribunal considered the requirements of the taxpayer's employment which did not support working from home and therefore the costs were disallowed.

The full text of the judgement in this case is available at http://www.financeandtaxtribunals.gov.uk/