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HMRC internal manual

Business Income Manual

Wholly and exclusively: expenditure having an intrinsic duality of purpose: contents

S34 Income Tax (Trading and Other Income) Act 2005

Introduction and layout of guidance

When considering if an expense was wholly and exclusively for the purposes of the trade you are not confined to considering what was in the mind of the self-employed trader when they incurred the expenditure. Some forms of expenditure by their very nature have an inevitable non-trade purpose and therefore are always disallowed. The non-trade purpose may not be in the conscious mind of the trader but nevertheless is ever present.

There have been a number of cases where the existence of a subconscious non-trade purpose precludes deduction for expenditure notwithstanding the existence of a conscious trade purpose. Lord Templeman in Caillebotte v Quinn [1975] 50 TC 222 pointed out that the carpenter in that case ate his meal not because he was a carpenter but because he was a human being (see BIM37660). There are a variety of expenses that the courts have held, because of their nature, to have an intrinsic duality of purpose and as such are not an allowable deduction. These include:

  • ordinary ‘civilian’ clothing
  • food for sustenance
  • having somewhere to live
  • wishing to enjoy good health
  • wishing to avoid a criminal conviction - especially if there is a custodial sentence
  • helping one’s nearest and dearest

For expenditure that comes within these categories you do not have to establish a non-trade purpose; by their nature there is an intrinsic non-trade purpose and any expenditure is disallowed.

The most famous case in this category is that of Mallalieu v Drummond [1983] 57 TC 330 (see BIM37910). The courts have considered a variety of such expenses in which sub-conscious motive has played a part, to a greater or lesser extent.

Note that the pages in this section of the manual purely relate to the expenses of the self-employed and those trading in partnership. This guidance does not relate to expenses incurred by companies.