Revenue and Customs Commissioners v Banerjee (No 1) [2010] EWCA Civ 843

Facts

• Dr. Banerjee, a medical practitioner, incurred costs undertaking advanced training in geriatric medicine.
• She sought to deduct these professional training expenses from her taxable income.
• The dispute centered on whether these costs were incurred wholly and exclusively for the purposes of her existing profession.
• The case examined the requirements of section 74(1)(a) of the Income and Corporation Taxes Act 1988 (ICTA), now section 34 of the Income Tax (Trading and Other Income) Act 2005 (ITTOIA).
• The Certificate of Completion of Training (CCT) in geriatric medicine was necessary to qualify Dr. Banerjee as a consultant geriatrician, distinct from her role in general practice.

Issues

1. Whether the training costs incurred by Dr. Banerjee were deductible as expenses incurred wholly and exclusively for the purposes of her existing professional practice.
2. Whether there is a distinction between costs incurred to maintain or update existing skills and those incurred to obtain a qualification for a new specialization.
3. How the combined purpose test applies to expenses with multiple potential purposes under section 74(1)(a) ICTA / section 34 ITTOIA.

Decision

• The Court of Appeal held that Dr. Banerjee’s costs to obtain a CCT in geriatric medicine were not deductible.
• The court determined that the training costs were incurred to acquire a new professional qualification and role, not merely to maintain or update existing skills.
• The presence of any non-professional or additional purpose, however minor, was sufficient to disqualify the claim for deduction under the "wholly and exclusively" standard.
• The court adopted the combined purpose test from precedent, denying deductibility where any secondary purpose existed.
• The judgment clarified that training for a new specialization, even within the same general profession, does not meet the deductibility criteria.

Legal Principles

• The "wholly and exclusively" rule requires that deductible expenses must be incurred solely for the purposes of the existing profession, with no other purpose, regardless of its significance.
• Costs incurred to maintain or update current professional skills may be deductible; however, costs to obtain a new qualification for a different professional role are not.
• The combined purpose test rejects deductions where there is any purpose other than the furtherance of the taxpayer's existing profession.
• The decision aligns with prior authority such as Mallalieu v Drummond [1983] 2 AC 861 regarding the effect of duality of purpose.

Conclusion

The Court of Appeal clarified that professional training costs are deductible only when incurred wholly and exclusively to maintain existing skills, not when they confer a new qualification for a different role. Any additional purpose, however secondary, precludes deductibility under the statutory test.