Income Tax - Deductible Expenses

Question 1

Lucas v Cattell (1972) 48 TC 353 (phone rental)

Answer 1

 Employee was made to have a phone by his employer.
 Wanted to deduct the phone bill from tax.
 Court held that he could not apportion the line rental between private and business us as it was an overhead charge.
 Held, could not deduct from tax.

Question 2

Brown v Bullock 1961 3 All ER 129

Answer 2

 Employee was forced to join a social club by his employer so he could meet clients ect.
 The employee wanted this to be deducted from his expenses as he was forced to join the club.
 The court held however that the duties of the employee could be performed without joining the social club.
 ***This seems unfair but there are important policy issues here. If these sort of things were to be deductible expenses then all employers could say that they require their employees to come to work in a BMW.

Question 3

Blackwell v Mills [1945] 2 All ER 655.

expenditure to improve performance

Answer 3

 Persons subscribed to certain journals in their respective fields of academia.
 Tried to claim these as being tax deducatble as they got them to help increase their knowledge of their proffessions.
 Held, subscribing to journals was NOT REQUIRED for them to perform their jobs, it would only improve their performance of their work.

Question 4

HMRC v Banerjee [2010] STC 2318 CA.

Expenditure to Improve Performance

Answer 4

 Found at first instance that her job (as a trainee doctor) was intrinsically related to going to certain training sessions.
 The trainee sessions were compulsory for her if she was to qualify as a full doctor.
 She would have been fired from her employment if she did not go to these sessions so it was NECESSARY for her to go to them.

Question 5

Fitzpatrick v IRC (No 2), Smith v Abbott [1994] STC 237

Newspapers bought by journalists

Answer 5

 Held: Judgment in favour of the Inland Revenue (Browne- Wilkinson, L.J. dissenting in the English appeal). Since journalists were employed to write for their employer’s newspaper, they read other newspapers in their spare time not in the performance of their duties but in order to ensure that they would perform their duties efficiently. The question of whether an employed taxpayer incurred a particular expense necessarily in the performance of his duties was a mixed question of law and fact. In the instant case the English General Commissioners had made an error of law. The rules on deduction of employees’ expenses must be strictly construed.

Question 6

Rickets v Colquhoun 1926 AC 1

travelling expenses - deductible expenses

Answer 6

 Barrister in London was a part time Judge in Portsmouth.
 He tried to claim the travel from London to Portsmouth for his job as the judge as deductible expenses.
 The court held that he failed the “necessarily” test as not all judges would have to travel from London to Portsmouth (i.e. some could live localy) so it was not an expense that all Judges who performed that job would have to incur.
 It also failed the “in the performance” test as travelling to work form home is not deemed as “in the performance” of his job.