This case centres around the ‘wholly and exclusively’ test for determining whether self-employed travel, subsistence and accommodation expenses are allowable deductions for tax purposes. Mr Healy is a well-known actor who entered into a contract to appear in a musical production in London. As Mr Healy resides in Cheshire, he rented a flat in London for the duration of his nine month contract, which had a two week break clause.

HMRC argued that Mr Healy’s claim to deduct his rental costs (of £32,503) as an expense of his trade should be disallowed on the basis that these were not incurred ‘wholly and exclusively’ for the purpose of his trade. HMRC insisted the length of occupation of the flat suggested that although Mr Healy was indeed providing himself with shelter whilst working in London, he had a dual purpose whereby he was also seeking a permanent base in London.

Mr Healy’s accountant supported his claim by focussing on the itinerant nature of Mr Healy’s work, i.e. his job requires him to travel to work in different locations for differing lengths of time. It was argued that for this reason it was clear that the sole purpose for renting the flat was to provide shelter in London to allow Mr Healy to appear in the stage show. On appeal, the First-tier Tribunal (FTT) found in favour of Mr Healy, agreeing that his purpose was only temporary and therefore clearly ‘wholly and exclusively’ for the purpose of his trade.

HMRC appealed to the Upper Tribunal who agreed the FTT made an error of law by not considering duality of purpose in their application of the wholly and exclusively test for the accommodation, that is to say, was Mr Healy’s sole purpose in incurring the accommodation costs in order to carry on his profession as an actor, with the provision of warmth, shelter and comfort merely being incidental to this sole purpose, or was there a shared purpose, in which case the costs would not be allowable.

An encouraging factor in the considerations made by the Upper Tribunal was the rejection of HMRC’s argument that the length of Mr Healy’s occupation of the flat demonstrated a duality of purpose. The Upper Tribunal upheld that there are no rules regarding the length of occupation and this alone does not verify a dual purpose.

This case is interesting because not only does it involve a well know actor, but also many professionals and traders incur accommodation costs when working away from home, whether this is staying in a hotel or renting out a property for a longer period.

The case will now be determined by the FTT based on what was in Mr Healy’s mind when he signed the lease agreement and the outcome case may well have implications not only for other itinerant workers but also for other professionals and traders.

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