Case Law

Expenses must be incurred before they can be deducted. Naval Colliery Co Ltd v IRC 1928 12 TC 1017

In Herbet Smith v Honour 1999 STC 173 the taxpayer was entitled to a deduction for a provision of future rental payments in respect of business premises which had become surplus to requirements.

The distinction between expenses and losses was discussed in Allen v Farquharson Bros & Co 1932 17 TC 59.

The central issue of this appeal was the correct percentage of private use of motor vehicles and the amount of motor expenses, capital allowances and fuel to be added back. The taxpayer had instructed his accountant that a 10 percent add back was sufficient to cover private use but a 33 percent add back had been returned in the income tax return. Revenue disputed a 10 percent add back. The Tax Appeals Commissioner determined that a 10 percent add back was sufficient to cover private use and that the higher percentage was returned in error. 06TACD2017

For the Purpose of the Trade

A bad debt arising on advances made by the taxpayer to its supplier, to ensure continuity of supplies, held not incurred for the purpose of its trade. English Crown Spelter Co Ltd v Baker 1908 5 TC 327.

“wholly and exclusively”

In Mallalieu v Drummond 1983 STC 665 the taxpayer was a practicing lady barrister who bought black clothing for her court appearances in conformity with the Bar Council’s guidance notes on dress. She claimed the cost of replacing and laundering her court clothes. The Court held that the taxpayer’s object was both to serve the purpose of her profession and also to serve her personal purposes.

In Murgatroyd v Evans Jackson 1966 43 TC 581 the taxpayer conducted his business from his hospital room. The taxpayer’s claim for 60 per cent of the hospital charges as a business expense was rejected.

Regular annual subscriptions to a local hospital were allowed. Bourne & Hollingsworth Ltd v Ogden 1929 14 TC 349

In Norman v Golder 1944 25 TC 293 the taxpayer was a self-employed shorthand writer who claimed medical costs. The Court rejected his claim.

In Morgan v Tate & Lyle Ltd 1954 35 TC 367, the taxpayer claimed the costs of a campaign to prevent the confiscation of its entire trade under a proposed programme of nationalisation. The Revenue’s argument that the expenditure was incurred by the taxpayer in the capacity as ‘owner’ rather than as ‘trader’ was rejected by the House of Lords.

The cost of insuring against workmen’s compensation claims was held to be allowable since it served to mitigate a potential future expense. Thomas v R Evans & Co Ltd 11 TC 790

The Tax Appeals Commissioner partially allowed the taxpayer's appeal to deduct wages paid to his sister. Revenue had disallowed the deduction on the basis that they wages were now 'wholly and exclusively laid out or expended for the purposes of the trade or profession’ 13TACD2016

If foreign withholding tax paid was an allowable deduction or to be treated as a loss. 02TACD2018

If expense incurred on meals is deductible for a self-employed landscape gardener. Meals were held not to fall within section 81. 08TACD2018

“This appeal concerned the right of a company to make tax free payments to an employee in respect of travel and subsistence.” 20TACD2018

Private and business use of car by driving instructor and allowable tax deduction 05TACD2019

Tax deduction for foreign dividend withholding tax incurred which was not separately relievable under double tax rules 08TACD2019

Capital or Revenue Expenditure?

The cost of forming a new holding company was held to be capital in Kealy v O’Mara 1942 1 ITR 642

The costs associated with a corporate restructuring were held to be capital in Watney Combe Reid & Co Ltd v Pike 1982 STC 733

Expenditure designed to achieve a capital outcome remains capital in nature, even if that outcome is not actually achieved. Pyrah v Annis 37 TC 163

In Walker v Joint Credit Card Co 1982 STC 427 a lump sum payment to a competitor to cease trading permanently was held to be capital.

Costs incurred by an investment company in evaluating potential future investments were capital. Hibernian Insurance Company Ltd v MacUimis 2000 V ITR 495

Annual payment for goodwill of a cinema business was a revenue expenses. Ogden v Medway Cinemas 1934 18 TC 691

Supplementary pension contributions to a trust fund on behalf of certain employees were revenue in nature. Jeffs v Ringtons Ltd 1985 STC 809 However, in British Insulated & Helsby Cables Ltd v Atherton1926 10 TC 155 a single lump sum paid to establish a pension fund was capital. Subsequent contributions to the fund were held to be revenue.

In Southern v Borax Consolidated 1940 23 TC 597 the taxpayer incurred legal costs in protecting its title to land and buildings used for the purpose of its trade. Such costs were held to be revenue.

Costs of promoting a bill in the Oireachtas, to empower a gas undertaking to compensate employees dismissed as a result of improved efficiency, were revenue in nature. McGarry v Limerick Gas Co 1 ITR 375

In IRC v Carron Co 45 TC 18, the costs of amending the terms of a company’s charter, in order that it could trade more efficiently, were held to be revenue in nature.

This appeal concerned the tax deduction of "voluntary partner retirement" payments in computing Schedule D, Case II profits of a partnership. 127TACD2020

This appeal concerned a payment made by a company to a widow of a deceased director of the company. The appeal considered if the payment was deductible as a trading expense under S.81 145TACD2020