HMRC v Tim Healy [2013] UKUT 0337 (TCC): the Upper Tier Tax Tribunal remits the actor’s accommodation case back to the First Tier Tax Tribunal for a rehearing.

In 2012 the First Tier Tax Tribunal (FTT)  found that actor Tim Healy’s accommodation costs when working for 9 months on the London stage were allowable for tax as they were “wholly and exclusively” incurred for the purposes of his trade.

HMRC appealed against the decision: it argued that the FTT had erred in law and had not fully considered the tests necessary to come to the conclusion that it did.

The Upper Tier Tax Tribunal (UTT) heard HMRC’s appeal in April and has just published its decision. There was a delay because Mr Healy was concerned about costs and HMRC had refused to make the case a test case, the result was that Mr Healy did not have legal representation at the UTT hearing.

The facts as originally found by the FTT were that:

  • Mr Healy is based in Cheshire and rented a flat in London, while acting in the musical Billy Elliot.
  • The tenancy had a two week break clause which he used to terminate the tenacy early when he his run in the play ended.
  • Cheshire was his home and he did not intend London to be his home.
  • He rented a flat because it was cheaper than a hotel.

The FTT had decided the case on the basis that Mr Healy not want to make London his home. This meant that his accommodation costs were allowable for tax purposes, and so he could claim a deduction for the cost against his income from the London play. The UTT looked at this decision and agreed with HMRC that the FTT had not properly considered the tests for duality of purpose for the wholly and exclusively rule (section 34 ITTOIA 2005).

The outcome of the hearing is that the case has been remitted back to the FTT to rehear.

The FTT must determine whether the effect of Mr Healy taking the flat, namely of providing him with the warmth, shelter and comfort  was merely incidental to the purpose of renting the flat so that he could appear in London or whether it was a shared purpose. If the former were the case the expenditure would have been deductible, if the latter there was a dual purpose and the expenditure would not be deductible.

Our comment

It was put to HMRC, at the UTT hearing (as it had been put to the judge in the FTT hearing) that if an actor’s accommodation costs were not allowable then neither would the accommodation costs of say, a London based barrister attending a 9 month VAT fraud trial in Newcastle who had decided to rent a flat rather than a hotel because it was cheaper. Likewise would accommodation be deductible if Mr Healy were on tour, or for what period of accommodation would be allowable? HMRC’s barrister was unable to give the UTT a satisfactory response.

The outcome of this case will affect a lot of self employed individuals, however, and quite bizarrely in our opinion, if you are what HMRC accepts as an itinerant worker (typically a jobbing builder) then you are allowed tax relief for your short-term accommodation costs because the nature of your business means that you travel to work away from home. We find it very difficult to see why an actor is not treated in the same way as an itinerant worker, and why say the barrister in the above example might also be treated any differently.

More confusingly for taxpayers if you are an employee, and say have to go to a tax conference overseas - such as an employee of HMRC might, his expenses including accommodation will all be allowed for tax. This is because employee have a different set of rules. At the end of the day, you have to ask why there should be any difference for employees and the self employed in this matter.

Recently the UTT looked at the wholly and exclusively rule in the case of Duckmanton v HMRC, and made a helpful summary of what it considered is the “modern thinking” on the wholly exclusively rule see, Wholly and exclusively…update.

Following that line of thinking Mr Healy might find some comfort in Mallalieu v Drummond [1983] 2 AC 861 where the distinction between the object of the taxpayer in spending money and the effect of the expenditure was explained by Lord Brightman in at 870F-871A:

"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 upon him. He seeks to recover the cost 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 upon his patient, his stay on the Riviera was an unavoidable effect of the expenditure on the journey and the expenditure lies outside the prohibition …"

The UTT in the Healy case took a slightly different look at wholly and exclusively than was taken in Duckmanton because it was required to look at the decision of the FTT and decide whether there had been an error or law. It decided to remit the case back to the FTT because it wanted the FTT to establish the facts more fully.

So at this moment tax advisers and taxpayers in the UK are slightly closer to unravelling the vexed question as to "when is accommodation allowable as a business expense"? This drama is one that could potentially go on for years and years and we are not holding our breath. For now we will have to wait and see what approach the FTT take when they rehear the case later this year.


This case was reheard by the FTT in 2014 and decided in HMRC's favour.


Case reference: HMRC v Tim Healy [2013] UKUT 0337 (TCC)

First FTT hearing: T Healy v HMRC [2012] UKFTT TC01940

Referred back to FTT: Tim Healy v HMRC [2015] UKFTT TC04425