Wholly and exclusively
Owner-Managed Businesses
Guidance
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 鈥榳holly and exclusively鈥� 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鈥檚 manuals devote a significant number of pages to the subject. See BIM37000鈥揃IM38600 for the scope of HMRC鈥檚 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鈥檚 Taxes B2.315鈥揃2.324.
Wholly and exclusively 鈥� the basic principles
The 鈥榳holly and exclusively鈥� test can only be satisfied if the sole reason for incurring the expenditure is for the purposes
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