Wholly and exclusively test and duality of purpose – Healy v CRC

The rules on whether expenditure may be allowed as a deduction under the ‘wholly and exclusively’ principles can often be contentious.  This is demonstrated by the number of cases taken to the courts to determine such disagreements.

The recent Upper Tier Tribunal case of Healy v CRC has added further material to the case law on the subject, and due to the outcome promises more to come as it has been referred back to the First Tier Tribunal.

The case concerned professional actor, Tim Healy, and whether or not the cost of his accommodation in London was an allowable expense.  The First-tier Tribunal had allowed his original appeal on the basis that he had not been looking for a permanent home in London.

HMRC appealed, arguing that the tribunal had erred in law by ignoring whether or not Mr Healy had a duality of purpose when incurring the costs as it met the need for warmth and shelter than he ordinarily had.

The Upper Tier Tribunal agreed that by failing to address this point the Tribunal had erred in law.  Based on the facts available to them, they did not have the necessary detail to determine the case.  It was therefore remitted to the First-tier Tribunal for a new hearing.

The outcome of the re-heard case could have wider implications for the self-employed and so it will be interesting to see how the case develops.  In the meantime, it is important to take care in this area and take each case on its own merits.

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