BIM37940 - Wholly & exclusively: expenditure having an intrinsic duality of purpose: health
Treatment of work induced illness
Medical expenditure on ensuring or restoring good health is not
allowable.
In the case of Norman v Golder, [1944] 26TC293, a shorthand
writer working in the courts had suffered from a severe illness and
had incurred expenses - doctor’s bills, etc. Norman stated
that his illness was the direct result of working in unfavourable
conditions. Norman contended that the expenses should be deducted
in computing the liability to tax in respect of his earnings as
being expenditure wholly and exclusively incurred in connection
with his professional work, and not domestic expenditure.
Alternatively, Norman contended that the expenditure should be
allowed as an allowance for wear and tear.
Norman also contended that the onus was on the Crown to prove
that the assessment was correct and not upon himself to show that
it was incorrect. Furthermore the assessment was invalid
because:
- the notice of assessment did not set out the statute under which the assessment was made nor the person who made it;
- the Finance Act for the year of assessment was not competently passed;
- the assessment had been made by an Inspector of Taxes and not by the appropriate Commissioners;
- the notice of assessment was incorrect in detail.
In addition he questioned the validity of the stated case as it
was signed by only one of the two Commissioners who heard his
appeal, the other having died.
The court held that if the case were invalid no appeal to the
courts was competent but as the appellant had proceeded with the
appeal he could not now argue that the case was invalid. On the
other technical points raised the courts dismissed the
taxpayer’s contentions.
On the substantive point the Master of the Rolls, Lord
Greene, explained why no deduction was due. Because the human body
is not ‘plant’, Lord Greene dismissed the
Norman’s argument that his own body was subject to wear and
tear and that he was entitled to medical expenses required to
maintain it. The judge goes on to say that it is also impossible to
argue that doctor’s bills represent money wholly and
exclusively laid out for the purposes of the trade, profession,
employment or vocation of the patient. It is true that if you do
not get yourself well and so incur expenses to doctors you cannot
carry on your trade or profession, and if you do not carry on your
trade or profession you will not earn an income, and if you do not
earn an income the Revenue will not get any tax. The same thing
applies to the food you eat and the clothes that you wear. But
expenses of that kind are not wholly and exclusively laid out for
the purposes of the trade, profession or vocation. They are laid
out in part for the advantage and benefit of the taxpayer as a
living human being.
You should disallow medical expenditure that is directed at
treatment of an illness. There will always be a personal motive in
wishing to enjoy better health. Expenditure incurred for that
purpose will therefore be of a dual nature and is not allowable.
Different considerations may apply where expenditure is on purely
cosmetic matters and where health considerations are not involved -
see
BIM37945.
For those who do not have ready access to tax case volumes,
the part of Lord Greene’s judgement where he explains why the
expenditure was not allowable is set out below, 26TC foot of page
298 and head of page 299:
His argument is that they are permissible
deductions on one of two grounds - one on general grounds; the
other under the wear and tear clauses. I hope I may be forgiven if
I say that so far as the wear and tear argument is concerned, it is
quite impossible to say that the taxpayer’s own body is a
thing which is subject to wear and tear, and that the taxpayer is
entitled to deduct medical expenses because they relate to wear and
tear. It is wear and tear of plant or machinery. Your own body is
not plant. Your horse conceivably may be. I do not know what it is
under the Income Tax Acts. It certainly has, under the
Employers’ Liability Acts, been held to be plant in a
suitable case, but I have never heard it suggested by anybody that
the taxpayer’s own body could be regarded as plant. In fact
the point has only, I think, to be stated.
He says it is deductible on general grounds.
The answer there, to my mind, is quite conclusive. The rules about
deductions are to be found in [what is now ICTA88/S74
(1)(a)],
in which deduction is prohibited in respect of
‘(a) any disbursements or expenses, not being money wholly
and exclusively laid out or expended for the purposes of the trade,
profession, employment or vocation.’ It is quite impossible
to argue that doctor’s bills represent money wholly and
exclusively laid out for the purposes of the trade, profession,
employment or vocation of the patient. True it is that if you do
not get yourself well and so incur expenses to doctors you cannot
carry on your trade or profession, and if you do not carry on your
trade or profession you will not earn an income, and if you do not
earn an income the Revenue will not get any tax. The same thing
applies to the food you eat and the clothes that you wear. But
expenses of that kind are not wholly and exclusively laid out for
the purposes of the trade, profession or vocation. They are laid
out in part for the advantage and benefit of the taxpayer as a
living human being. [What is now ICTA88/S74 (1)(b)]
…equally would exclude doctor’s
bills, because they are, in my opinion, expenses of maintenance of
the party, his family, or a sum expended for a domestic or private
purpose, distinct from the purpose of the trade or
profession.
