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HMRC internal manual

Business Income Manual

Wholly and exclusively: expenditure having an intrinsic duality of purpose: cost of restoring health and fitness

S34 Income Tax (Trading and Other Income) Act 2005

Nursing home costs

Expenditure incurred to nurse a taxpayer back to good health after illness, surgery etc is not allowable.

In the case of Murgatroyd v Evans-Jackson [1967] 43 TC 581, Mr Evans-Jackson carried on the profession of trade mark agent partly at an office in Albert Hall Mansions, London, where he employed a routine staff of eight to ten people, and partly from Dublin, where a firm of accountants provided him with a permanent office and secretary.

As the result of an accident, Mr Evans-Jackson ruptured a disc in his spine, and he was advised by a neurologist that he should receive electrical treatment.

Mr Evans-Jackson was offered a bed in a NHS hospital but was unable to take advantage of this offer as it would have been impossible for him to conduct his profession owing to the restricted hours of visiting and a telephone not being available to him. Also, he would not have been able to hold conferences with his clients and staff.

Mr Evans-Jackson entered a nursing home as a private patient and was provided with a room and all the necessary facilities to enable him to carry on his profession. He stayed in the nursing home for five weeks during which period he received treatment and held conferences with his clients. Also, members of his staff called every morning and afternoon with his correspondence, which he dealt with and gave them instructions to pass on to his clients.

Mr Evans-Jackson claimed 60% of the nursing home costs as a deduction in computing his profits. This apportionment betrayed the essential duality of purpose. However, the judge made the point that, had the taxpayer claimed all of the costs, the claim would still have failed because there would still be duality of purpose. Mr Evans-Jackson based his claim on the assertion that the costs were in effect office costs incurred for the purposes of his trade.

Plowman J pointed out that the claim to deduct only 60% of the costs pointed to the fatal duality of purpose and that no deduction was due. The judge went on to say that it may have been more plausible to claim the whole of the costs but such claim would also have failed:

`The whole object of going into the nursing home in the first place was to receive treatment for the injury that he had sustained. It seems to me that it would offend common sense to say that at any rate one of his motives or purposes in going into the nursing home was not to receive treatment for that injury - teatment that would enure to his benefit, not merely during the time when he was carrying on his business, but,… “as a living human being”.’