BIM37950 - Wholly & exclusively: expenditure having an intrinsic duality of purpose: cost of restoring health and fitness
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, 43TC581,
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, Evans-Jackson ruptured a disc
in his spine, and he was advised by a neurologist that he should
receive electrical treatment.
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.
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, and 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.
Evans-Jackson claimed 60% of the nursing home costs as a
deduction in computing his profits. This apportionment betrayed the
essential duality of purpose. But the Judge also makes 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.
Evans-Jackson based his claim on the assertion that the costs were
in effect office costs incurred for the purposes of his trade. The
General Commissioners allowed the deduction.
Plowman J points 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 goes on to say that it may have been more
plausible to claim the whole of the costs but such claim would also
fail. 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 seemed to the judge that it would offend common sense
to say that at any rate one of the Evans-Jackson’s motives or
purposes in going into the nursing home was not to receive
treatment for that injury. Treatment that would enure to the
Evans-Jackson’s benefit, not merely during the time when he
was carrying on his business, but, ‘as a living human
being’.
For those who do not have ready access to tax case volumes,
the part of Plowman J’s judgement where he explains why the
expenditure was not allowable is set out below, 43TC589I to
590C:
It seems to me that the claim by Mr. Evans-Jackson for 60 per cent of his expenses is really fatal to his case, because implicit in a claim for only 60 per cent of the expenses must be an admission that the expenses involved a dual purpose, namely, as to 60 per cent expenses of conducting an office and as to 40 per cent something else. More plausible, I think, would have been Mr. Evans-Jackson’s claim had he claimed the whole of his expenses in the nursing home and not merely 60 per cent of them. But even had he claimed the whole of the expenses, it seems to me that it would not really be a rational view of the situation to conclude that the whole of his expenses in the nursing home were incurred wholly and exclusively for the purposes of his business. The whole object of going into the nursing home in the first place was to receive treatment for the injury which he had sustained, and 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 – treatment which would enure to his benefit, not merely during the time when he was carrying on his business, but, as Lord Greene M.R. said in the passage I have already read from Norman v Golder [26TC293, at page 298 see BIM37940] ‘as a living human being’.
