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  • Paul Clifton

Dancer in pole position for tax relief

Claiming business expenses - can I claim a proportion of expenses for tax purposes?

Overview of the tax rule

Many clients ask what they can claim for as tax deductible expenditure i.e. expenses that can be deducted from their income to reduce the amount of their taxable profit and therefore their tax liability.

I thought that I would share with you an ‘interesting’ recent tax case that illustrates the tax rules. I also hope that the introduction to this article would be helpful to business clients in helping them to ascertain what expenses they can claim for tax purposes.

The wholly and exclusively rule

Some countries publish detailed tax rules on exactly what expenses can be claimed. The UK tax law uses a fairly broad and simple definition, but it is open to judgment and interpretation.

The basic tax rule, in the UK, is that an expense can be claimed for tax purposes if it was incurred ‘wholly and exclusively for the purpose of the trade’. Put simpler, this means that the expenditure has no duality of purpose. Putting it another way, the expense should not be incurred for both a business and a private purpose simultaneously. The last word in this sentence is important.

If I took the train from Leeds to London to visit a friend and whilst I was in London I bought a tube ticket to visit a business client, then would I be able to claim for the train and the tube journey? What was the purpose of travelling to London? It was primarily to visit a friend. There may have been some duality of purpose in making the trip to London, but I would not have travelled to London just to visit the client.

The cost of the train journey is therefore not a tax deductible expense. However, the entire cost of the tube ticket to visit a client was incurred wholly for business. There was no duality of purpose. I would therefore be able to claim the whole cost of the tube ticket.

However, if I was to take a train from Leeds to London to meet a client and whilst I was in London I decided to take the tube to visit a friend, then this completely changes what can be claimed. The purpose of the journey to London was wholly to visit the client and therefore the train journey is a tax deductible expense. If I then went to meet a friend by using the tube, then that is a private cost. If I happened to then take the opportunity of meeting a business client who worked very close to my friend, then I would not be able to claim for the tube journey as there was duality of purpose; the primary reason being to visit a friend.

Duality of purpose

Duality of purpose and simultaneously incurring an expense for both business and private purposes does not always mean that some proportion of the expense cannot be claimed for tax purposes.

Most small self-employed business owners will use their own car for business and private purposes. Whilst they are able to claim for their business journeys at 45 pence per mile (up to 10,000 miles), they also have the option to instead claim a proportion of the total annual running costs of the car. If their annual running costs amounted to £5,000 and the car was used 75% for business miles, then the self-employed owner could claim £3,750 of the expenditure.

Whilst the car was being used for business it was not simultaneously being used for private journeys. You are therefore able to claim the business proportion.

The use of the car is totally different to the cost of travelling from Leeds to London. Whilst travelling on the train you cannot determine the private proportion or the business proportion of the journey. In other words there is simultaneous business and private use to the cost of the train journey and therefore an apportionment cannot be made.

A word of warning on limited company expenses

Please note that there are different rules when the car is owned by a limited company and made available to the director/employee. Different rules also apply, if an expense is incurred by a limited company for the benefit of its employees, even if that includes paying for a private journey on a train. These expenses will always be tax deductible by the company (as they relate to the employee’s remuneration) BUT the director/employee would then be subject to a taxable benefit in kind, therefore negating the tax saving by the limited company.

Two interesting tax cases

The following examples of two actual legal cases illustrate this further.

Bare facts

Gemma was a self-employed exotic dancer who performed at Stringfellows nightclub in London. HMRC issued a tax assessment for additional tax for several years on the basis that she had claimed excessive business expenses on her work clothes. HMRC also issued penalties on the basis that her Tax Returns for those years were carelessly inaccurate. The court ruled that she should be allowed to claim the cost of certain clothes, hairdressing and make-up against her profits.


Mallalieu was a female barrister. She lost her court case claiming for formal clothing (dark suits, white blouses etc) which she required to attend court. This is the leading legal case on the subject of claiming clothing as a tax deductible expense. Few accountants these days would risk claiming for their clients’ ordinary clothes. Yet Gemma claimed a deduction for clothing (including underwear), cosmetics, shoes and hairdressing, and the judge granted her claim.

To understand this, we need to review why Mallalieu lost her case and what was so different about Gemma’s clothing.

Why Mallalieu lost?

Mallalieu’s reason for claiming that her clothing costs were incurred “wholly and exclusively” for the purposes of her trade was that she would never have worn such clothes privately. She had genuinely only bought the clothes in order to be allowed to appear in court.

The House of Lords judged that she had a second (duality of) purpose. This was that the clothes were worn for “warmth and decency”. She had to wear something and she could easily wear the court clothing in private. There was “duality of purpose” and therefore the “exclusively” test was failed.

An example of clothing which is not worn privately or for warmth and decency is protective clothing e.g. hard hats, safety boots, protective coats and high visibility jackets. These are tax deductible expenses as they are not worn for warmth and decency. There is no duality of purpose for this type of expenditure. It is incurred wholly and exclusively for the trade so as to protect the individual.

Why Gemma won?

The type of clothes Gemma wore to perform at Stringfellows were “not appropriate to be worn outside that club”; they were “see-through” and “skimpy”. Most importantly, they could not be described as providing “warmth and decency”, the mantra used in the Mallalieu case.

This extended to her lingerie, which was “of a suggestive nature and… not suitable for use outside Stringfellows”. Her shoes included 6 to 10 inch high heels designed to grip a pole while hanging upside down from it during her act.

The judge decided that, while Mallalieu could easily have worn her court clothes in private life, Gemma could not have worn her dancing clothes outside the confines of the Stringfellows club. Therefore, there was no duality of purpose, and the costs of Gemma’s specific dancing and performing clothing should be allowed as a tax deductible expense.

Perhaps the judge in this case should visit the streets around the pubs and nightclubs in Leeds on a Saturday night! He may find that this type of skimpy, see-through and suggestive clothing is being worn outside, though perhaps not for warmth and decency.

Whilst nobody would care if you look like an off-duty barrister on the bus, the courts draw the line at looking like an off-duty exotic dancer!

It should be noted that a similar reasoning applies to the theatrical make-up which Gemma used in her performances, as well as to the hair extensions, fake tan and manicures. The judge referred to HMRC’s own tax manuals including guidance for actors where even the cost of cosmetic dentistry and other ‘body enhancements’ may be considered acceptable expenditure for a performer.

Keep your receipts

This case also highlighted that Gemma was not able to claim for 80% of her clothing costs that she had included on her Tax Returns as she was not able to demonstrate that she had incurred the expense. She had bought some of her clothing in cash from market stalls and similar outlets and she had not asked for receipts. Whilst paper receipts and invoices are not the only means of demonstrating that you have incurred an expense, they are a very good source.

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