With a view to qualifying as a maxillofacial surgeon, a dentist entered into a training contract at a London hospital which was a centre of excellence in the field. He rented a flat close to the hospital and spent almost £40,000 on accommodation over a four-year period. He sought to deduct that sum for Income Tax purposes but HM Revenue and Customs (HMRC) disputed his entitlement to do so.

Frequently on call, he asserted that he was required to live within 30 minutes’ travel time from the hospital. As a doctor licensed by the General Medical Council, he was required to put his patients’ interests before those of his wife and children, who had continued to reside at the family home in Southampton. The modest flat was not in an area where he would otherwise have chosen to live. As a mature professional, it was not reasonable to expect him to live in hospital accommodation generally used by undergraduates.

HMRC argued that the ‘wholly, exclusively and necessarily’ test enshrined in Section 336 of the Income Tax (Earnings and Pensions) Act 2003 was not satisfied. His employment contract did not require him to rent a home close to the hospital. He did not work from home and, in giving him a roof over his head, the flat provided him with a considerable personal benefit unconnected to his duties.

Ruling on the matter, the First-tier Tribunal (FTT) accepted that his accommodation costs arose from his obligations as the hospital’s employee. He had to live close to the hospital in order to perform his on-call duties. Many of his patients had suffered severe traumatic head injuries and required emergency treatment. When he was formally on call or in attendance at the hospital, he did not derive any personal benefit from the flat.

The FTT ruled, however, that his use of the accommodation for the performance of his employment duties was restricted to periods when he was both on call and giving advice whilst present in the flat. Only a proportion of his accommodation costs therefore satisfied all three limbs of the deductibility test. The FTT expressed the hope that the relevant proportion would be agreed in the light of its ruling.