HMRC internal manual

Business Income Manual

Wholly and exclusively: how to establish purpose: contents

S34 Income Tax (Trading and Other Income) Act 2005, S54 Corporation Tax Act 2009

Introduction and layout of guidance

When looking to establish the ‘purpose’ of expenditure you are looking to establish the aims or objectives underlying the expenditure. Romer LJ in the case of Bentleys Stokes & Lowless v Beeson [1952] 33 TC 491 (see BIM37400) at page 503 said unequivocally:

`The sole question is whether the expenditure in question was ‘exclusively’ laid out for business purposes, that is: What was the motive or object in the mind of the two individuals responsible for the activities in question?’

This points very clearly to the need to look at the mind of the trader to establish the purpose.

The following guidance considers the meaning of wholly and exclusively, how to establish purposes and the distinction between purpose and motive.