HM Revenue and Customs v Decadt
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE PATTEN |
| Judgment Date | 09 May 2007 |
| Neutral Citation | [2007] EWHC 1659 (Ch) |
| Court | Chancery Division |
| Date | 09 May 2007 |
[2007] EWHC 1659 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London
WC2A 2LL
The Honourable Mr Justice Patten
Mr Akash Nawbatt appeared on behalf of the Claimant
Defendant counsel not present
Approved Judgment
1. This is an appeal by the Commissioners for Her Majesty's Revenue and Customs against a decision of the General Commissioners for the division of Bolton and Bury in the county of Greater Manchester, in relation to the deductibility for income tax purposes of certain expenditure incurred by the Respondent taxpayer, Dr Decadt. The expenditure in question consists of various examination fees, associated accommodation and travelling expenses in the sum of £3,054.00. The expenses were disallowed by the Inspector as not satisfying the conditions of s.336(1) of the Income Tax (Earnings and Pensions) Act 2003 (“ITEPA”). The Commissioners allowed the taxpayer's appeal.
2. The Respondent is a qualified registrar in General Surgery. He was employed under a contract dated 21 st April 1999, as a Specialist Registrar in General Surgery at the Hope Hospital in Salford for the period from 5 th April 1999 to 31 st October 2005. Under the terms of the contract, and in particular, clauses 6 and 7 of the contract, he was required to attend specific training courses for the purpose of qualifying as a Consultant Surgeon and was issued with the national training number for the duration of his participation in the training program. Clause 7 of his contract provided:
“Your appointment is dependent on your continuing to hold a National Training Number and your continued satisfactory assessment/appraisal review on a regular (at least yearly) basis. You should take all reasonable steps to secure the issue of the Certificate of Completion of Specialist Training (CCST) as soon as you are notified that the College or Faculty has recommended its award.”
3. This type of contract has been set up in order to encourage doctors to qualify as Specialist Surgeons. The taxpayer proceeded to deduct some £3,054 in respect of the cost of attending various courses, examinations and appraisals pursuant to the requirement under the terms of the contract to obtain the CCST certificate.
4. The General Commissioners, having been addressed on the law, concluded in paragraph 10 of their decision, as set out in the case stated:
“We consider that the Respondent was not only employed as a Specialist Registrar Trainee but it was inherent in his Contract that he would obtain the CCST so that he could become a specialist surgeon. The North Manchester Healthcare, along with other healthcare authorities, is a training authority for specialist surgeons and therefore made passing the examination an obligatory part of the Contract of Employment.”
On that basis they allowed the taxpayer's appeal, and the Revenue appeals against that decision to this court. An appeal, of course, lies only in relation to an error of law, but Mr Nawbatt on behalf of the Revenue, contends that the facts as found by the Tribunal do not qualify Dr Decadt for the deduction of the relevant expenditure against his taxable income.
5. The provisions which govern allowable expenditure are now contained in s.336(1) ITEPA (2003). That provides:
“(1) The general rule is that a deduction from earnings is allowed for an amount if:—
(a) the employee is obliged to incur and pay it as holder of the employment, and
(b) the amount is incurred wholly, and exclusively and necessarily in the performance of the duties of the employment.”
Under the previous legislation the phrase in what is now sub-section 1(a) was “necessarily obliged to incur,” but it is not suggested either by the Commissioners or, I think, by any of the more recent authorities, that the removal of the reference to “necessarily” has altered the substance of the relevant provision in the statute. It has been decided by a series of cases that, for expenditure which is incurred as a term of a contract of employment to be deductible it has not only to be incurred in the sense that the taxpayer is obliged to incur it as part of his employment, but it has to be necessarily incurred as a result of the nature of the duties of the employment. That concept is inherent not only in the provisions of sub-section 1(a) as it now stands, but also in sub-section 1(b) with its emphasis on the expenditure having been incurred wholly and exclusively and necessarily in the performance of the duties of the employment.
6. Expenditure in relation to the taking of examinations in the context of the training contract has been considered in a number of previous cases. In Blackwell v. Mills 26 ...
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...training is merely preparatory, or ancillary, to it. 38 I have so far said nothing about the recent decision of Patten J in Revenue & Customs Commissioners v Decadt [2007] EWHC 1659 (Ch), [2008] STC 1103, upon which the Revenue understandably place considerable reliance. That was a case wit......
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