The Upper Tribunal has ordered a fresh hearing of the case involving actor Tim Healy, who sought to claim the costs of renting accommodation while working away from home in his self assessment tax return.
Healy, who lives in Cheshire, appeared in a musical in London and during this period stayed in a rental property at the cost of £32,503. HMRC challenged Healy's deduction, saying the expenses were not incurred wholly and exclusively for the purposes of his profession.
The First tier Tribunal (FTT) ruled in favour of the actor, and the HMRC appealed to the Upper Tribunal on the basis that the FTT had erred in law in falling to consider if Healy had a dual purpose in incurring the expenditure.
In its judgment published last week, the Upper Tribunal found that the FTT had failed to apply the wholly and exclusively test properly and so had failed to establish whether Healy's sole purpose in incurring the expenditure was to carry on his profession as an actor.
In order to determine this, the Upper Tribunal said the FTT needed to establish if the effect of his taking the property, namely of providing him with warmth, shelter and comfort, was merely incidental to that purpose or was a shared purpose. Instead, the FTT had focused on the issue of whether or not Healy was seeking a home in London.
HMRC argued that because of the length of time for which the property was rented, nine months, Healy must have had the purpose of providing warmth, and shelter. The Upper Tribunal rejected this argument, and said there was no hard and fast rule as to when the length of occupation clearly tips the balance in favour of the conclusion that there is a dual purpose.
As the matter could be resolved only by reference to what was in Healy's mind as the subjective purpose when he entered into the rental agreement, the Upper Tribunal ruled it was necessary for the case to be remitted to the FTT for a fresh hearing.