Wholly and Exclusively


Wholly and Exclusively

The subject of business expenses and what can be claimed is an old chestnut that many businesses still make mistakes over. A recent case, Azam v HMRC, looks again at expenses incurred 'wholly and exclusively' for the purposes of the business.

In this case, Mrs Azam owned a beauty salon. She found that she needed counseling sessions to help deal staffing issues that may turn out to be confrontational. The counseling she undertook followed the principles of the Church of Scientology, something that she believed in.

Mrs Azam tried to claim the cost of the counseling, but HMRC disagreed and Mrs Azam took the case further. However, the Tax Tribunal also disagreed with Mrs Azam on the basis that Mrs Azam had in mind (subconsciously) the personal benefit she derived from the counseling. This was a duality of purpose, i.e. the counseling wasn't purely for business reasons - it was also a benefit to her own health - and as such the expense were not deductible.

As far as HMRC are concerned - see their online manual at http://www.hmrc.gov.uk/manuals/bimmanual/BIM37900.htm - there are certain types of expenditure which have an intrinsic duality of purpose and which will always be disallowed. For example, ordinary clothing (as opposed to dedicated work clothes); a place to live (as opposed to overnight accommodation for a trip); or wishing to have good health (as opposed to special computer reading glasses).

If in doubt about an expense, and you wish to avoid a tustle with HMRC, take advice from your accountant.

This was first published in February 2011

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