For both income tax and corporation tax purposes, one of the fundamental conditions that must be satisfied for an item of expenditure to be deductible, is that it must incurred ‘wholly and exclusively’ for the purposes of the trade, profession or vocation. References to CTA 2009 apply for companies and references to ITTOIA 2005 apply for sole traders and partnerships.

While the legislative basis for this is brief, it is a complex issue and there is a significant body of case law devoted to determining what exactly is meant by the term, in the context of a wide variety of trades and expenses. Consequently, HMRC’s manuals devote a significant number of pages to the subject. See BIM37000–BIM38600 for the scope of HMRC’s reference on this subject.

This guidance note discusses the broad principles, key cases and how to approach determining whether an expense is allowable.

See also Simon’s Taxes B2.315–B2.324.