Upper Tribunal Confirms Approach to Deductibility of Employee Expenses


In Commissioners for HMRC v Jayanth Kunjur [2023] UKUT 00154 (TCC), the Upper Tribunal (UT) concluded that the First-tier Tribunal (FTT) erred when it allowed an appeal in part brought by Mr Kunjur against various assessments and a closure notice charging income tax. The UT confirmed the long-standing approach to the issue of deductibility of employee expenses in accordance with s.336 ITEPA 2003 and case law.

Mr Kunjur, a qualified dentist and trainee oral maxillo-facial surgeon, lived in Southampton with his family. He accepted a surgical training placement in South London and rented accommodation near to the hospital at which he worked. Mr Kunjur claimed he was entitled to relief for that expenditure in his tax return for the relevant tax years. The FTT held he was entitled to relief for a proportion of expenditure by reference to the amount of time it considered he spent at the premises performing some of the duties of his employment. HMRC appealed the decision.

The UT concluded the FTT erred in holding both that: (i) Mr Kunjur was obliged to incur the expenses as the holder of an employment; and (ii) the expenses were incurred wholly, exclusively and necessarily in the performance of the duties of the employment. As to (i), the UT concluded, in light of Ricketts v Colquhoun 10 TC 118 and Owen v Pook [1970] AC 244, the FTT had failed to consider whether all doctors employed in Mr Kunjur’s role would be obliged to incur expenditure of that nature. The UT concluded Mr Kunjur incurred the expenditure because his family home was in Southampton; that was a matter of choice arising from his personal circumstances.

As to (ii), the UT concluded the FTT erred in finding that expenditure could be apportioned to identify an amount which was incurred wholly and exclusively in the performance of the duties. Having found the expenditure on rental accommodation served a dual purpose, which included a personal benefit to Mr Kunjur, the FTT should not have found that a proportion of expenditure was incurred “wholly and exclusively” in performance of his duties. Further, in light of Elderkin v Hindmarsh [1988] STC 267 and Ricketts v Colquhoun, the expenditure on rental accommodation put Mr Kunjur in a position to do his work, but he did not incur the expenditure itself in the performance of his duties.

The UT allowed HMRC’s appeal and re-made the decision so as to dismiss Mr Kunjur’s appeal against the assessments.

Marianne Tutin was instructed by HMRC.

A full copy of the decision can be found here.

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