Mallalieu v Drummond: HL 27 Jul 1983

The taxpayer was a barrister. To comply with Bar guidance on court dress, she wore, in court and in and to and from chambers black dresses, suits and shoes and white blouses. The clothing were perfectly ordinary articles suitable for everyday wear. But for her professional requirements she would have not purchased those clothes. She had other clothes to keep her in comfort and decency. The preservation of warmth and decency was not a consideration which crossed her mind when she bought the clothes. In computing the profits of her profession in the year of assessment 1977-78, the taxpayer claimed that the sum she had spent on the replacement, laundering and cleaning of the clothes she wore in court was expenditure incurred’wholly and exclusively . . for the purpose of her profession’.
Held: The inspector’s appeal succeeded. The object of incurring such expenditure was both to serve the purposes of the barrister’s profession and also to serve her personal purposes. The words ‘expended for the purposes of the . . profession’ in section 130(a) meant ‘expended to serve the purposes of the . . profession’ and ‘purposes’ in this context referred to the purposes of the business. To decide whether money was expended to serve the purposes of the tax payer’s business it is necessary to discover the tax payer’s object in making the expenditure. Though the tax payer’s conscious motive was of vital significance in ascertaining her object, it was not decisive and the Commissioners were entitled to find on the facts that as the taxpayer had to wear something, one object was the provision of the clothing that she needed as a human being. It followed that the expenditure was not incurred wholly and exclusively for the purposes of her profession.
Lord Brightman said: ‘The effect of para (a) is to exclude, as a deduction, the money spent by the taxpayer unless she can establish that such money was spent exclusively for the purposes of her profession. The words in the paragraph ‘expended for the purposes of the trade, profession or vocation’ mean in my opinion ‘expended to serve the purposes of the trade, profession or vocation’; or . . ‘for the purpose of enabling a person to carry on and earn profits in the trade etc.’ The particular words emphasised do not refer to ‘the purposes’ of the taxpayer as some of the cases appear to suggest; . . They refer to ‘the purposes’ of the business which is a different concept although the ‘purposes’ (i.e. the intentions or objects) of the tax payer are fundamental to the application of the paragraph.
The effect of the word ‘exclusively’ is to preclude a deduction if it appears that the expenditure was not only to serve the purposes of the trade, profession or vocation of the tax payer but also to serve some other purposes. Such other purposes, if found to exist, will usually be the private purposes of the taxpayer . .
To ascertain whether the money was expended to serve the purpose of the taxpayer’s business it is necessary to discover the taxpayer’s ‘object’ in making the expenditure: see Morgan -v- Tate and Lyle Ltd [1955] AC 21 at 37 and 47. As the taxpayer’s ‘object’ in making the expenditure has to be found, it inevitably follows that (save in obvious cases which speak for themselves) the commissioners need to look into the taxpayer’s mind at the moment when the expenditure is made. After events are irrelevant to the application of s.130 except as a reflection of the taxpayer’s state of mind at the time of the expenditure.
If it appears that the object of the taxpayer at the time of the expenditure was to serve two purposes, the purposes of his business and other purposes, it is immaterial to the application of s.130 (a) that the business purposes are the predominant purposes intended to be served.
The object of the taxpayer in making the expenditure must be distinguished from the effect of the expenditure. An expenditure may be made exclusively to serve the purposes of the business, but it may have a private advantage. The existence of that private advantage does not necessarily preclude the exclusivity of the business purposes. For example, a medical consultant has a friend in the South of France who is also his patient. He flies to the South of France for a week, staying in the home of his friend and attending professionally on him. He seeks to recover the costs of his air fare. The question of fact will be whether the journey was undertaken solely to serve the purposes of the medical practice. This will be judged in the light of the taxpayer’s object in making the journey. The question will be answered by considering whether the stay in the South of France was a reason, however subordinate, for undertaking the journey, or was not a reason but only the effect. If a week’s stay on the Riviera was not an object of the consultant, if the consultant’s only object was to attend on his patient, his stay on the Riviera was an unavoidable effect of the expenditure on the journey and the expenditure lies outside the prohibition in s.130.

He went on to describe the approach taken in the High Court and the Court of Appeal:- ‘As the taxpayer according to the undisputed evidence had nothing in her mind except the etiquette of her profession on the several occasions when she spent money on the upkeep of her wardrobe of working clothes, and ‘had no thought of warmth and decency’, it inevitably followed that the money was spent exclusively to serve the purposes of her business.
The provision of clothing as such, it was held, was nothing more than an incidental, although no doubt welcome, effect of her one and only object. The approach of the Court of Appeal was similar.
Lord Brightman concluded:- ‘My Lords, I find myself totally unable to accept this narrow approach. Of course the taxpayer thought only of the requirements of her profession when she first bought (as a capital expense) her wardrobe of subdued clothing and, no doubt, as and when she replaced items or sent them to the launderers or the cleaners she would, if asked, have repeated that she was maintaining her wardrobe because of those requirements. It is the natural way that anyone incurring such expenditure would think and speak. But she needed clothes to travel to work and clothes to wear at work, and I think it is inescapable that one object, though not a conscious motive, was the provision of the clothing that she needed as a human being. I reject the notion that the object of a taxpayer is inevitably limited to the particular conscious motive in mind at the moment of expenditure. Of course the motive of which the taxpayer is conscious is of vital significance, but it is not inevitably the only object which the commissioners are entitled to find to exist. In my opinion the commissioners were not only entitled to reach the conclusion that the taxpayer’s object was both to serve the purposes of her profession and also to serve her personal purposes, but I myself would have found it impossible to reach any other conclusion.
It was inevitable in this sort of case that analogies would be canvassed; for example, the self employed nurse who equips herself with what is conveniently called a nurse’s uniform. Such cases are matters of fact and degree. In the case of the nurse, I am disposed to think, without inviting your Lordships to decide, that the material and design of the uniform may be dictated by the practical requirements of the art of nursing and the maintenance of hygiene. There may be other cases where it is essential that the self employed person should provide himself with and maintain a particular design of clothing in order to obtain any engagements at all in the business that he conducts. An example is the self -employed waiter, mentioned by Kerr LJ, who needs to wear ‘tails’. In his case the ‘tails’ are an essential part of the equipment of his trade, and it clearly would be open to the commissioners to allow the expense of their upkeep on the basis that the money was spent exclusively to serve the purposes of the business. I do not think that the decision which I urge on your Lordships should raise any problems in the ‘uniform’ type of case that was so much discussed in argument. As I have said, it is a matter of degree.’
Lord Brightman, Lord Diplock, Lord Keith and Lord Roskill
[1983] 57 TC 330, [1983] 2 AC 861, [1983] 2 All ER 1095, [1983] 3 WLR 409, [1983] UKHL TC – 57 – 330
Income and Corporation Taxes Act, 1970 130(a)
England and Wales
Appeal fromMallalieu v Drummond CA 1983
The taxpayer, a lady barrister, sought to set off against her liability to tax, the cost of purchasing clothing which she would only wear at court in accordance with professional requirements. The clothing although subdued consisted of perfectly . .
CitedStrong and Co of Romsey Ltd v Woodifield HL 30-Jul-1906
The company sought to deduct from its trading profits a sum expended paying damages for personal injuries to a visitor to the taxpayer’s Inn. The claim had been rejected.
Held: The company’s appeal failed. Lord Davey said: ‘I think that the . .
CitedPrince v Mapp (Inspector of Taxes) 1970
. .
CitedMorgan v Tate and Lyle Ltd HL 1955
The words ‘for the purposes of the trade’ in the statute mean ‘for the purposes of enabling a person to carry on and earn profits in the trade’. Money spent for the purpose of preserving the trade from destruction can properly be treated as wholly . .

Cited by:
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CitedJames v Bank of England EAT 13-Apr-1994
. .
CitedVodafone Cellular Ltd v Shaw (Inspector of Taxes) ChD 8-Mar-1995
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VDT Supply of hot toasties and of grilled panani – was it a supply in the course of catering or was the taxpayer’s purpose to enable the items to be consumed hot – Note 3 Group 1 Schedule 8 VATA 1994 – appeal . .

These lists may be incomplete.
Updated: 13 January 2021; Ref: scu.199765