Mallalieu v Drummond [1983] STC 665

Facts

  • Miss Mallalieu, a barrister, claimed a tax deduction for the cost of her court clothing, including black dresses, suits, and shoes, asserting these were necessary for her professional duties due to barristers' required dress standards.
  • The Inland Revenue denied the deduction on the basis that the clothing served a dual purpose: meeting both professional requirements and functioning as ordinary wear.
  • The Special Commissioners and the High Court ruled in Miss Mallalieu's favour, allowing the deduction.
  • The Court of Appeal and subsequently the House of Lords reversed these decisions, disallowing the deduction.

Issues

  1. Whether the cost of clothing required for professional duties is deductible for tax purposes under the "wholly and exclusively" rule in Section 174 of the Income and Corporation Taxes Act 1970.
  2. Whether clothing, even if mandated by professional dress codes, can be considered as incurred solely for business purposes when it also serves as ordinary wear.
  3. The interpretation and application of the "wholly and exclusively" test to business expense claims for clothing.

Decision

  • The House of Lords held that clothing required for professional purposes, but also suitable for ordinary wear, does not satisfy the "wholly and exclusively" requirement for deductible business expenses.
  • The decision emphasized that the taxpayer’s motive and the objective nature of the expenditure must be examined; if any dual purpose exists, the deduction is disallowed.
  • The Court determined that only clothing serving a single business purpose, such as protective gear or uniforms with no ordinary wear function, may qualify for tax deduction.

Legal Principles

  • The "wholly and exclusively" rule permits deductions solely for expenses incurred for one identifiable business purpose; any secondary, non-business purpose results in non-deductibility.
  • The test requires careful consideration of the taxpayer’s motive and the objective effect of expenditure.
  • Exceptions to this rule include clothing serving no ordinary wear function, such as specialist uniforms or costumes.

Conclusion

The House of Lords’ decision in Mallalieu v Drummond [1983] STC 665 established that regular clothing required for professional purposes is not tax deductible under the "wholly and exclusively" rule if it also serves as ordinary wear. Deductions for clothing expenses are limited to items with no regular use outside the workplace, such as specific uniforms or protective gear. The case remains the central authority on this principle in UK tax law.

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