Carry on at the tax tribunal

Lubbock Fine, 12 September 2018

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By Clare Munro, senior tax partner
020 7490 7766

Every now and then a tax case comes through the court system which raises an eyebrow and occasionally a chuckle.  This week the press report a victory in the tax tribunal for Ms Gemma Daniels, a self-employed exotic dancer at Stringfellows club in Covent Garden.

HMRC challenged the claim for professional clothing and travel expenses, raising an assessment for some £8,600 additional tax. While the tribunal dismissed her travel claim, they took the view that the skimpy nature of her outfits made them unsuitable for wear outside the club. She was therefore permitted to claim the costs of dance wear, dry cleaning and cosmetics against her taxable profits.

There’s irony in the contrast between this and the old case of the barrister Ms Mallalieu.  Mallalieu’s claims to deduct the costs of her black court clothes were refused on grounds that she needed them anyway for warmth and decency!  As the judge pointed out, Ms Daniels’ outfits were designed to achieve the reverse.  So, on that basis, their costs, including for underwear, which is usually non-deductible on the grounds that it is never seen during the course of professional life, could be eligible for relief.

For most of us, the requirement for a deductible expense to be ‘wholly and exclusively’ for business purposes means that the cost of personal items is disallowed.  Few of us will have a business use claim for 10 inch stilettos, but the Daniels case reminds us that where items really aren’t suitable for anything other than your business, a deduction should be considered even if the expense appears to have a personal element.  By pursuing her point Ms Daniels saved not only the tax on the cost of her outfits, but also penalties and interest. 

If you would like to discuss your business expenses please speak to Clare Munro or call 020 7490 7766.