BIM42145 - Deductions: scope of: capacity test

The nature of the expense does not determine purpose

The capacity test referred to in Strong & Co of Romsey Ltd v Woodifield 5TC215, - see BIM38510, has been criticised in later judgements. If an incidental benefit is obtained by a trader in some capacity other than as trader, that does not override the test as to purpose (Smith's Potato Estates Ltd v Bolland, 30TC267 - see BIM37060, Usher's Wiltshire Brewery Ltd v Bruce, 6TC399 - see BIM37200, and Harrods (Buenos Aires) Ltd v Taylor Gooby 41TC450 - see BIM37300).

Remoteness

A test of remoteness might be inferred from the decision in Union Cold Storage Ltd v Jones, 8TC725 - see BIM37200, but is difficult to apply in practice. The test for duality of purpose cannot be inferred from the nature of the expense.