BIM37947 - Wholly and exclusively: expenditure having an intrinsic duality of purpose: medical expenses of a specific character dictated by the occupation
S34 Income Tax (Trading and Other Income) Act 2005
A healthcare expense is not automatically excluded
As noted in BIM37900, healthcare costs will often be disallowed, as wishing to enjoy good health would normally have an intrinsic duality of purpose.
Although maintaining good health can benefit a business, the effect of maintaining good health is more than just an incidental benefit. (See also Norman v Golder (1944) 26 TC 293 in BIM37940, Prince v Mapp (1969) 46 TC 169 in BIM37945, and Murgatroyd v Evans-Jackson (1967) 43 TC 581 in BIM37950.)
However, where medical expenses are of “a special character dictated by the occupation as a matter of physical necessity” it may be possible to conclude that the expenses have been incurred wholly and exclusively for the purposes of the trade or profession. It is important to establish the facts and specific circumstances in each case to determine whether any healthcare expenses were incurred for the purpose of improving or maintaining the health of the taxpayer, or if this was merely an ‘unavoidable effect’.
In Parsons (2010) TC 00421, the Tribunal decided that expenses for a private medical operation were incurred wholly and exclusively for the purposes of the trade/profession carried on by the taxpayer.
Mr Parsons was self-employed as a stunt performer. While performing a stunt, he damaged his knee and needed surgery. He started working again before the operation and his knee gave way again, meaning he was physically incapable of doing what was required as a stunt performer. Mr Parsons could have waited for an operation under the NHS but instead paid for private care.
HMRC submitted that costs of surgery were not deductible as the restoration of heath was not a business purpose referring to Norman v Golder (1944) 26 TC 293 and Prince v Mapp (1969) 46 TC 169.
The Tribunal disagreed and found that the expenditure on this knee operation was ‘wholly and exclusively laid out or expended for the purposes of the trade or profession’. The demands of this specialised work led to the conclusion that the circumstances of the knee operation were ‘of a special character dictated by the occupation’.
With reference to Norman v Golder and Prince v Mapp, at para 33 the Tribunal explained:
... Health is a human need, and even if it is impossible to work without being healthy, medical expenses incurred to maintain health are at least in part ‘in part for the advantage and benefit of the taxpayer as a living human being’. Medical expenses therefore will normally serve a dual purpose and will not satisfy the ‘exclusivity’ test. However, where medical expenses can be said to be of ‘a special character dictated by the occupation as a matter of physical necessity’, the Tribunal considers that it may be possible to conclude that the expenses were ‘wholly and exclusively laid out or expended for the purposes of the trade or profession’, and that any benefit as a human being is merely an ‘unavoidable effect’ rather than a purpose of the expenditure.
It was part of Mr Parsons’ job to assume the risk of injury while performing a stunt, and if an injury were sustained, to recover and move on to the next stunt. There was no need for him to have incurred the cost of the knee operation apart from the need to keep on working. The Tribunal noted that under normal circumstances he could have waited for treatment under the NHS and would have been content to wait. This would have met his basic need to recover from the injury, and he would not have incurred any costs. However, the need to keep on working meant that he chose to go private. The Tribunal found as follows:
37. On the evidence, the Tribunal is satisfied that in terms of his requirements as an ordinary human being, he could have waited, and would have been content to wait, to have the operation on the NHS. The evidence was also that in a physically less demanding job he could have carried on working in the meantime, and that it was only because of the particular demands of the kind of work that he does that he could not carry on working until the operation was done.
38. In the Tribunalʼs view, the very circumstances in which the injury was sustained, and the need for this particular injury to be repaired in order for the Appellant to be able to continue to meet the particular demands of his specialised work, lead to the conclusion that the circumstances of the knee operation were ‘of a special character dictated by the occupation’. The Tribunal is satisfied that the Appellant, in having the operation performed privately, was not motivated in whole or in part by his medical needs as a normal human being (these being sufficiently catered for by the NHS). He was solely motivated by the requirements of his work. The Tribunal is satisfied on the peculiar facts of this case that any benefit that the Appellant had from the operation as a normal human being was an ‘unavoidable effect’, rather than a reason, for undertaking the operation.
Similar conclusions were reached in respect of costs relating to chiropractor fees and massage costs that had also been deducted. Both expenses related directly to his work as a stuntman and would not need to be incurred if he was not working. The Tribunal found that any personal benefit was an unavoidable effect rather than a reason for undertaking the treatment. He had also incurred cost of some dental treatment following stunt-related injury. That was also allowed as he sometimes worked as a stunt double and as such had to present himself appropriately.
Mr Parsons had also deducted costs related to general health and fitness. No evidence was provided that these expenses were related directly and specifically to the work as a stuntman and so the expenses were found to serve a dual purpose. At para 48 the Tribunal accepted that a particular level of physical fitness may be a general requirement of the work; however, that was also true of many other occupations.
The Tribunal emphasises that its decision was based on the facts of the case and did not create a general proposition that a stunt performer is entitled to deduct certain types of expenditure or is not entitled to deduct others.