Lucas v Cattell (1972) 48 TC 353

Facts

• Mr. Lucas, a police officer, resided in police accommodation at a station.
• His employment required him to answer work-related telephone calls at home, leading to personal telephone expenses.
• Mr. Lucas claimed these telephone expenses should reduce his taxable income, arguing they were wholly, exclusively, and necessarily incurred for his duties.

Issues

1. Whether Mr. Lucas’s telephone expenses, incurred due to a requirement to take work calls at home, were deductible as being wholly, exclusively, and necessarily incurred for the performance of his employment duties.
2. Whether the presence of both personal and work-related use of the telephone precluded such expenses from being deductible.
3. What standard should be applied to determine if costs are solely attributable to employment within the meaning of tax law.

Decision

• The High Court denied Mr. Lucas’s claim to deduct telephone expenses from his taxable income.
• Justice Walton concluded that, although some calls were work-related, the telephone was mainly used for personal reasons; thus, the expenses were not wholly and exclusively incurred for work.
• The requirement to be available for work purposes did not transform the expense into one incurred exclusively for employment.
• The presence of a mixed purpose—both personal and professional—prevented the deduction, regardless of the employer's requirements.

Legal Principles

• The “wholly and exclusively” test requires that deductible expenses must result solely from work activities, with no element of personal use or benefit.
• Mixed-purpose costs, even if primarily arising from employment requirements, are not deductible.
• The deductibility of an expense is determined by its primary reason (the cause of the expense), not by employer demands or employee advantage.
• Employees must demonstrate a clear separation between personal and work costs for expenses to qualify.
• Accurate record keeping, such as detailed call logs, is necessary to support claims that expenses were incurred wholly and exclusively for employment.
• The case aligns with HMRC rules, which require division of mixed personal and work costs and robust evidence of work-related expenditure.

Conclusion

Lucas v Cattell (1972) 48 TC 353 established that employment-related expenses are only deductible for tax purposes if incurred wholly and exclusively for the job, with mixed-use expenses—such as a home phone used for both personal and work purposes—not qualifying, regardless of employer requirements or modern changes in work practices.