Introduction
The deductibility of clothing costs for tax purposes depends on the "wholly and exclusively" rule set out in Section 174 of the Income and Corporation Taxes Act 1970 (now Section 34 of the Income Tax (Trading and Other Income) Act 2005). This principle requires that expenditure must be solely for the purpose of the trade, profession, or vocation, with no other purpose allowed. Mallalieu v Drummond [1983] STC 665 offers a key judicial analysis of this rule regarding clothing costs, stating that even if clothing is needed for work, the added purpose of serving as regular wear makes it non-deductible. The House of Lords decision in this case continues to be a central part of UK tax law for business expense claims, particularly for work-related clothing.
The Facts of Mallalieu v Drummond
Miss Mallalieu, a barrister, claimed the cost of her court clothing, including black dresses, suits, shoes, and similar items. She argued these items were required for her job, following the dress standards for barristers. The Inland Revenue rejected the claim, stating the clothing had two uses: professional requirements and ordinary wear. The initial Special Commissioners and the High Court ruled for Miss Mallalieu, but the Court of Appeal and House of Lords later overturned these rulings.
The House of Lords' Ruling
The House of Lords focused on the taxpayer’s intent when purchasing the clothing. While accepting the clothing’s professional necessity, Lord Brightman, in the primary judgment, stressed that the "wholly and exclusively" test required examining the taxpayer’s main motives. He concluded that even if clothing is objectively required for work, any added purpose, such as regular wear, means the expense does not meet the test.
The "Wholly and Exclusively" Rule Explained
The "wholly and exclusively" rule allows deductions only for expenses with a single business purpose. Any other purpose, however minor, makes the expense non-deductible. This ensures tax relief applies only to costs purely for business. Mallalieu v Drummond confirms the strict use of this rule, showing that even clear business needs may be disallowed if another purpose exists.
Implications for Deductible Clothing Costs
The Mallalieu v Drummond decision shaped how clothing costs are treated. It established that regular clothing, even if required for work, cannot be deducted due to the dual purpose of basic wear. This applies to all professions with dress codes. Deductions are generally allowed only for protective gear or uniforms not used outside work.
Exceptions to the Rule
While Mallalieu v Drummond limits deductions for regular clothing, certain exceptions apply. These include costumes for performers or uniforms like nurses’ scrubs or construction workers’ safety gear. These exceptions apply where clothing has no regular use and is solely for work. The design and purpose of such clothing prevent its use outside specific job contexts.
Subsequent Case Law and HMRC Guidance
Later cases, such as McKnight v Sheppard [1999] STC 755 (involving a stockbroker’s work clothing), have upheld the strict use of the "wholly and exclusively" rule. HMRC guidelines also follow these principles, outlining allowable deductions for specific jobs and clothing types. This steady approach helps keep clear rules for determining valid deductions.
Conclusion
Mallalieu v Drummond [1983] STC 665 is a major case in UK tax law, defining how the "wholly and exclusively" rule applies to clothing costs. The House of Lords stressed the need to assess both objective needs and main motives, such as regular wear. This ruling limits deductions for standard work clothing, except for specialized uniforms or costumes. The case remains a key reference for taxpayers, advisors, and legal professionals, offering clear rules for allowable clothing costs under UK tax law.
