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HMRC internal manual

Business Income Manual

Wholly and exclusively: duality of, or non-trade, purpose: travel costs: overseas conference plus holiday

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

Mixed holiday and business trip

Where you establish duality of purpose in travel, the costs are disallowable. No part of the expenditure is referable wholly and exclusively to the trade, profession or vocation. See BIM37600.

In Bowden v Russell & Russell [1965] 42 TC 301, Mr Taylor, a solicitor, visited America and Canada with his wife to attend the annual meeting of the American Bar Association in Washington and Empire Law Conference in Ottowa in an unofficial capacity. Mr Taylor’s law practice was not of an international nature.

The taxpayer claimed a deduction from the trading profits for the costs of the visit, excluding his wife’s expenses. Mr Taylor gave the following reasons in support of the claimed deduction:

  • to maintain his status as a solicitor
  • to improve his reputation in the UK, and
  • to increase his clientele

Mr Taylor conceded that it was also his intention to have a holiday with his wife at the same time. Mr Taylor did not weigh the cost against the prospective benefit to his practice, thinking it essential that he did attend. As a result of his examination of methods used by other solicitors at the conference, the taxpayer introduced an electric typewriter for greater efficiency and other changes were also under consideration.

The Crown advanced two arguments against deduction:

  • the subject matter of the two conferences was remote from the work of Mr Taylor’s firm (the ‘remoteness test’, see BIM37200), and
  • the purpose of Mr Taylor’s visit was not exclusively to enable him to attend the conferences but substantially included holiday and social purposes (duality)

Pennycuick J approved the words of Romer LJ in Bentleys Stokes and Lowless v Beeson [1952] 33 TC 491 (see BIM37400) and disallowed the whole of the expenditure. This was because of the Commissioners’ finding of fact that Mr Taylor intended to have a holiday at the same time as the conference. No allowance was due because the expenditure was incurred for a dual purpose. Pennycuick J expressed no opinion on the question of remoteness of the subject matter of the conferences from the work of the firm. As the taxpayer had admitted in evidence before the Commissioners that the travel was undertaken in part for the purpose of having a holiday, Pennycuick J found the costs to be inadmissible, see 42 TC at page 306:

`…the Commissioners in paragraph 4, which I have read, said that Mr Taylor gave evidence before them that

“it was also his intention to have a holiday with his wife at the same time”.

It seems to me that this statement by Mr Taylor represents an unequivocal admission by him that the expenses of the American visit were incurred for a dual purpose, namely (i) the advancement of his profession and (ii) the enjoyment of a holiday. This being the case [what is now S34(1)(a) ITTOIA 2005]… apply and prohibit the deduction of the expenses.’

For another case involving overseas travel where the deduction for the expenses was allowed, see BIM37615.