Duality sparks inside of me!

November 16, 2015
Duality sparks inside of me!

In the case of Healy v HMRC1, the First-tier Tribunal (FtT) considered the deductibility of an actor’s accommodation expenses when working away from home. Following an appeal to the Upper Tribunal, the FtT found that Mr Healy’s accommodation expenses had a duality of purpose. One of those purposes was not a business purpose and therefore the deduction claim failed the “wholly and exclusively” test.  The decision emphasises the importance of the motives and considerations of the individual in establishing trade purposes.


Tim Healy, a professional actor from Cheshire, was contracted to appear in Billy Elliot the Musical in 2005.  On 15 April 2005, he entered into a tenancy agreement to rent a flat close to the theatre for a fixed term of 52 weeks at a rent of £875 per week.  In his 2005/06 tax return he claimed a total of £32,503 for accommodation expenses, which covered the 36 week period he was performing in the musical.  HMRC denied the deduction on the basis that the expense was not wholly and exclusively incurred for the purposes of the trade.


Legislation prescribes that persons carrying on a trade can make no deduction if the expenditure is “not incurred wholly and exclusively for the purposes of the trade”.2  A long line of case law has considered this principle.  If there is an incidental private purpose the expenditure will pass the “wholly and exclusively” legal test but, if it is clear that there is secondary purpose to the expenditure (that is, there is a “duality of purpose”), it cannot.

Apportionment of an expense between a business purpose and a secondary purpose will only be accepted if a definite part of the proportion of the expense is wholly and exclusively laid out or expended for the purpose of the trade.


On first hearing, the FtT held that, since Mr Healy was “not seeking a home in London”, there was no duality of purpose – he rented the flat for the purposes of his trade.  However, on appeal by HMRC to the Upper Tribunal, it was held that the FtT had erred in law; it should have considered whether the “sole purposes of renting the flat in London was in order to carry on his profession as an actor”.  To determine this issue, it was necessary to consider whether it was merely incidental to the primary business purpose that the flat provided him with “warmth, shelter and comfort” and to determine this it was necessary to look at Mr Healy’s subjective intention.

On remission to the FtT, Mr Healy conceded on cross-examination that he had rented a three-bedroom flat because he knew the show would be an enormous success and that he had anticipated that many of his family and friends would want to visit him, for which he would need space.  The FtT found it relatively straightforward to conclude therefore that the rental of the flat, in those circumstances, clearly had a duality of purpose, and therefore the deduction should be disallowed.  Apportionment was not possible because no identifiable part of the expenditure had been incurred wholly and exclusively for the purposes of the trade.


This case is a good example of the proper application of the “wholly and exclusively” test for the deduction of an entertainer’s expenses.  The court did not rule out the possibility that accommodation expenses are deductible, but emphasised again that the question is a matter of subjective intention.

In cases like this, from a tax perspective at least, it may be better for actors to take short term hotel accommodation to avoid such duality of purpose arguments.

Karim Amijee, Trainee Solicitor, Michael Simkins LLP


[1]  Healy v HMRC [2015] UKFTT 0233 (TC) (28 May 2015)
[2] Income Tax (Trading and Other Income) Act 2005, s.34


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