SE31645 - The Schedule E expenses rule: necessarily incurred

The preceding paragraphs establish that Section 198(1) ICTA 1988 imposes an objective test; an expense can only be deductible if it is one that each and every holder of an office or employment would be obliged to incur. A deductible expense must also be one that is “necessarily” imposed on the holder of the office or employment by the duties of that office or employment.

To see whether an expense has been necessarily incurred you must find out what tasks have to be undertaken in order to carry out the duties of the job, see SE31635. An expense is only necessary if each and every holder of that office or employment would have to incur expenditure of that type.

Once again, just as for SE31642 this test relates to the nature of the expense and not to the amount. For example, a business trip may be made by train, car or bus. As long as the trip is necessary it does not matter that the various modes of transport have different costs. If the whole of the expense is of a type that is necessarily incurred you should not attempt to restrict the deduction to the minimum that could have been incurred.

The case of White v Higginbottom (57TC283) provides a useful example of the practical operation of the “necessary” test, albeit in relation to the similar rule relating to capital allowances, see SE36550.

The effect of this rule is illustrated by example SE31648.