The High Court dismissed an appeal by a taxpayer against the refusal of tax relief for fees for vocational training where a special commissioner had been fully entitled, on the facts, to treat such expenditure as capital.

Facts

The taxpayer, a tutor in English and an adviser in relation to the bringing of appeals before various tribunals, appealed against a decision of the special commissioner dismissing his appeal against the refusal of relief of £46 in respect of the payment of fees of £200 in 1998 as the enrolment fee for an examination in a part-time two-year course leading to a LL Dip qualification. The taxpayer had applied for relief on the grounds that the fees qualified for vocational training relief under s. 32 of the Finance Act 1991 FA 1991) or as a trading expense under Sch. D of the Income and Corporation Taxes Act 1988 (ICTA 1988). HMRC disallowed the claim and the special commissioner dismissed an appeal.

Issue

Whether the fee for the examination on the course constituted a capital or revenue expenditure.

Decision

Lightman J (dismissing the appeal) said that the claim for vocational relief was rightly refused by the commissioner for the reasons which he gave and the contrary was not argued.

The live legal issue was whether the fee for the examination on the course constituted a capital or revenue expenditure. There was no authority providing guidance on how the cost of courses should be treated for Sch. D purposes and so that issue had to be decided as a matter of principle. In Atherton v British Insulated Helsby Cables Ltd (1925) 10 TC 155, at p. 192, Viscount Cave said that when an expenditure was made, not only once and for all, but with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade, there was good reason in the absence of special circumstances leading to an opposite conclusion) for treating such an expenditure as properly attributable not to revenue but to capital. That was the approach adopted by the commissioner when he held that the course was not a ‘refresher’ course to brush up or ‘hone’ the taxpayer's existing expertise, but was directed at equipping the taxpayer with a new qualification enabling him to enter into a new area of practice. The line between the two might often be difficult to draw, but in this case the commissioner was fully entitled on the material before him to draw the line where he did. Far from his decision being open to challenge, that decision was clearly correct.

Chancery Division.

Judgment delivered 13 October 2006.