Bentleys, Stokes and Lowless v Beeson (HMIT): CA 1952

The court considered whether the partners in a firm of solicitors could deduct from profits the expenses involved in entertaining clients to lunch.
Held: They were deductible, notwithstanding the element of hospitality involved: ‘The relevant words of r 3 (a) of the Rules Applicable to Cases I and II ‘wholly and exclusively laid out or expended for the purposes of the . . profession’ appear straightforward enough. It is conceded that the first adverb ‘wholly’ is in reference to the quantum of the money expended and has no relevance to the present case. The sole question is whether the expenditure in question was ‘exclusively’ laid out for business purposes, that is: What was the motive or object in the mind of the two individuals responsible for the activities in question? It is well established that the question is one of fact: and again, therefore, the problem seems simple enough. The difficulty, however, arises, as we think, from the nature of the activity in question. Entertaining involves inevitably the characteristic of hospitality: giving to charity or subscribing to a staff pension fund involves inevitably the object of benefaction: an undertaking to guarantee to a limited amount a national exhibition involves inevitably supporting that exhibition and the purposes for which it has been organised. But the question in all such cases is: Was the entertaining, the charitable subscription, the guarantee, undertaken solely for the purposes of business, that is, solely with the object of promoting the business or its profit-earning capacity? It is, as we have said, a question of fact. And it is quite clear that the purpose must be the sole purpose. The paragraph says so in clear terms. If the activity be undertaken with the object both of promoting business and also with some other purpose, for example, with the object of indulging an independent wish of entertaining a friend or stranger or of supporting a charitable or benevolent object, then the paragraph is not satisfied though in the mind of the actor the business motive may predominate. For the statute so prescribes. Per contra, if, in truth, the sole object is business promotion, the expenditure is not disqualified because the nature of the activity necessarily involves some other result, or the attainment or furtherance of some other objective, since the latter result or objective is necessarily inherent in the act.’


Romer LJ


[1952] 33 TC 491


England and Wales

Cited by:

CitedDavid Robson v Eric Mitchell (HM Inspector of Taxes) ChD 8-Jul-2004
The taxpayer sought capital gains tax relief of a loan to a business.
Held: To succeed in his claim the taxpayer had to establish that the indebtedness created was to be used entirely to serve the borrower’s business. . .
Lists of cited by and citing cases may be incomplete.

Income Tax

Updated: 11 June 2022; Ref: scu.199764