Duality Of Purpose, Common Issues In HMRC Investigations

Duality of Purpose in HMRC tax investigations, with special reference to clothing. What it is, what you need to know about it, why it’s stupid and what should be done about it.

When HMRC investigate you there’s a high probability that they have identified ‘specific risks’. Which means that they think you’ve done wrong. But what if you haven’t? Well HMRC don’t just let you go, once they’ve got your files open they’ll want to get some sort of result to ‘save face’.

A common tactic to ‘save face’ is to grind down your expenses: they go through every single item and tell you that it’s not allowable.

If they can reduce your expenses your profits will go up and HMRC will get their result. Even if it’s a small amount in the year of investigation they can apply it to past years (called ‘scaling back’) and then they’ll add interest and penalties too, the small amounts will soon tot up.

When I was investigated I was working as a journalist, and so claimed newspapers as an expense. I was a features writer and they told me that I could only claim half of the cost of the newspapers because the news section was of no use to me. Stupid, I know. And they backpaddled very quickly when they were challenged.

This was an attempt of implementing a duality of purpose rule. Let’s look at another example: say are a freelance gardener and you claim your tools as a business expense, that’s all fine until the moment you use those tools on your own garden – and admit it to HMRC. Once you do that (even if it’s just the once) a proportion of that expense has to be deducted.

In the area of clothing duality of purpose becomes complex and inconstant; let’s start by dividing it up into the black, the white and the grey.

In the black we have safety clothing with your brand on. HMRC accepts that if you have a job that needs safety clothing, then that is 100% deductible, the branding helps your case too. Also, if you are an actor HMRC will allow you to claim the costumes as an expense. They specifically state: ‘The cost of clothing acquired for a role in a film, stage or TV performance is … allowable’ (HMRC manual BIM50160).

So far so good. Now over in the white we have a suit that you wear to work, even if you ONLY EVER wear that suit to work HMRC will not let you have any part of it as an expense. The case law here goes back to 1983 with Mallalieu v Drummond (Inspector of Taxes) where a female barrister, who wore dark suits only in court wanted to claim them as an expense. She lost her case because of the duality of purpose rule. It was decided that in addition to her presence in the courtroom her clothing provided her with ‘warmth and decency’.

Everything between those two extremes can fall into a grey area. So it’s open to argument and interpretation.

This brings us to the recent case of Miss Daniels, a self-employed ‘exotic’ dancer who had been working at Stringfellows for over nine years. She had claimed her outfits as an expense and HMRC said that the outfits were not allowable.

Miss Daniels took her case to the First Tier Tribunal. The Tribunal found that her dresses (purchased only for the purposes of her performances) were ‘see-through’ and ‘skimpy’, and often adorned with sequins. They were erotic, designed to allure and arouse, and would not be described as providing ‘warmth and decency’.

The tribunal judge considered that Miss Daniels’ expenditure on her clothing was ‘akin to the acquisition of a costume by a self-employed actor for use in a performance, expenditure which is … deductible’.

This case should never have gone to the First Tier Tribunal, the judge on the case Guy Brannan went on record saying that HMRC had taken a ‘rather unreasonable approach’.

Most people involved with HMRC will know how unreasonable they can be.


With a topic (such as clothing) HMRC should provide simple and constant rules with clarity which should be easy for everybody (including HMRC) to follow. This would remove the need to go to a Tribunal.

In cases where HMRC have behaved in an unreasonable way they should be held to account. The victim should be compensated significantly and the investigating officers significantly reprimanded. Only then will HMRC start to develop a more mature and business-like approach – rather than the playground bullying which is seen all too often.

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