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January 3, 2017

Accommodation and 'duality of purpose'

In calculating the profits of a trade, certain deductions can be made for expenditure incurred by the taxpayer.

Common allowable expenses include:

  • Office costs
  • Travel costs
  • Staff costs
  • Stock
  • Raw materials
  • Financial costs
  • Costs of business premises
  • Advertising or marketing

In order for an expense to be allowable, it must be incurred “wholly and exclusively” for the purpose of the trade. Therefore, if expenditure is incurred for more than one purpose other than the conduct of trade, it will be deemed to have a duality of purpose and will not be allowable.

The case of Tim Healy v HMRC examined whether an actor’s accommodation expenses incurred while putting on a performance were wholly and exclusively incurred for the purposes of his profession.


  • During tax year 2005-06, Tim Healy, best known for playing Dennis Patterson in the television series Auf Wiedersehen, Pet, performed in the West-End show Billy Elliot the Musical.
  • Mr Healy entered into a 12-month tenancy agreement to rent a three-bedroom flat just over a mile from the theatre where he was performing
  • In his self-assessment tax return, he claimed expenditure for the rent of the flat
  • HM Revenue & Customs found that this expenditure was not deductible.

The Case

Tim Healy submitted that although the tenancy agreement was for a 12 month period, it included a clause which allowed for early termination after 6 months.  He stressed that he knew that the musical would be performed for at least 6 months and at no point did he anticipate that it would be unsuccessful and terminated early.

He argued that at no point did he make a home in London. His home in Cheshire remained the place he received and dealt with all correspondence and he returned there once a week to see his family. It was impossible for him to travel to and from London after each performance, and on that basis the expenditure was incurred purely because he was required to work in London.

HMRC disagreed and stated that while temporary accommodation on a short business trip might be for exclusively business purposes, a residential tenancy for many months cannot.

As a separate point of argument, HMRC argued that the fact that the flat had three bedrooms was a factor in Tim Healy's decision to rent it, and friends and family regularly came to visit and stay overnight. Additionally, the flat had the purpose of meeting his ordinary needs for warmth and shelter. On this basis, there was a duality of purpose and the expenditure was not incurred wholly and exclusively for the purposes of his profession.

In response, Tim Healy stated that the fact that the flat had three bedrooms was immaterial. The flat was within the £1,000 per week budget for expenses that he was paid by the theatre company and cost no more than hotel accommodation. The additional bedrooms were merely incidental to the business expenditure.

The Decision

The Tribunal did not accept HMRC’s submission that the length of the business trip meant that the flat had a duality of purpose. There is ‘no hard and fast rule’ as to how long a business trip has to be before it stops being wholly and exclusively for business purposes. Whether or not the expenses are deductible must be based on the individual facts and circumstances of the case.

The Tribunal was satisfied that the expenditure on the flat was for the purpose of Tim Healy’s trade as an actor, however, Tim Healy’s intentions at the time he entered into the tenancy agreement was to find a flat that could accommodate visitors. This was an independent purpose and therefore the expenditure on the flat had a dual purpose of enabling him to perform in the musical and hosting guests.

On this basis, the appeal was dismissed.

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