Laser Eye Surgery - Wholly and Exclusively...?

Laser Eye Surgery - Wholly and Exclusively...?

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"Can I claim tax relief on laser eye surgery?" asked the client

My natural reaction was to say "No chance!" but then we continued the discussion to why he felt it might have some justification.

He runs a transport business but wishes to now start a chauffeur driven limousine business and he would be the chauffeur.

To do this he needs to obtain a licence as a Hackney Carriage driver and must undergo a medical.

One of the criteria is that uncorrected eyesight must be at least 3/60 (read the top line of the eye chart from 3 metres away) but with eyesight of -9/-6 he has no chance.

That means that unless he has eye surgery he cannot expand the business so that he can become a chauffeur.

My gut feeling is that, much like initial training for a job is not deductible, he cannot get relief as it is a pre-requisite to starting the trade but the argument would be:

1. Exclusively: If his uncorrected eyesight is not a certain standard he cannot get a licence and cannot trade

2. Wholly: He currently has glasses and contact lens and would continue to do so were it not for the trade.

Yes, there is of course a personal benefit to this BUT the argument is that without this then he cannot possibly expand the business to do chauffeuring.....

It's an interesting thought even if the answer may still be "no" and certainly there is an argument for him believing there is some merit in him making such a claim.

Replies (10)

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By martinscutt
13th May 2014 20:37

You killed your own argument at the end I think

when you agreed there was a personal benefit, by definition that is not wholly and exclusively.

BIM37940 quotes Norman v Golder [1944] while making the point that health has an intrinsic duality of purpose.

`It is also impossible to argue that doctor’s bills represent money wholly and exclusively laid out for the purposes of the trade, profession, employment or vocation of the patient. True it is that if you do not get yourself well and so incur expenses to doctors you cannot carry on your trade or profession, and if you do not carry on your trade or profession you will not earn an income, and if you do not earn an income the Revenue will not get any tax. The same thing applies to the food you eat and the clothes that you wear. But expenses of that kind are not wholly and exclusively laid out for the purposes of the trade, profession or vocation. They are laid out in part for the advantage and benefit of the taxpayer as a living human being'

I agree that he can survive without the treatment, but the personal benefit is still there is it not? 

Additionally, it is not for the carrying on of a trade but to start one, so even if it passed wholly & exclusively is it not creating something with an enduring benefit akin to training for a new trade? which is capital in nature.

Purely an academic exercise for me, I am no expert in arguing such points, and would be utterly unsurprised to be corrected on both points, but am interested to hear others thoughts.

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By Sherman Holter
13th May 2014 23:20

Uncorrected ?
Surely if he has the surgery then his eyesight will not be uncorrected, it will be corrected.

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Stepurhan
By stepurhan
14th May 2014 08:35

Uncorrected

In this context, I believe uncorrected means without the aid of glasses or contact lenses.

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By The Innkeeper
14th May 2014 10:03

Also look at
Prince v Mapp (1970)

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By JCresswellTax
14th May 2014 10:12

You've missed out 'Exclusively'

And, very simply, I think this is the test that is failed.

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By Steve Kesby
14th May 2014 10:56

Wholly and exclusively

The first point to make is that necessarily is not part of the test. As Martin says, the test is whether the expenditure is incurred wholly and exclusively for business purposes. It may be though that there is a business necessity that is the purpose of the expenditure.

The starting place is, therefore, to determine the purposes for which the expenditure was incurred. That is what objectives were in the taxpayer's mind when he incurred the expenditure.

If all of those objectives were business ones (the wholly test), and the expenditure was incurred in pursuit of those objectives, and only those objectives (the exclusively test), then the wholly and exclusively test is met, irrespective of the fact that some incidental benefit might arise (see BIM37400).

Martin is correct that the general restoration of health has intrinsic duality of purpose (BIM37940). There may be business purposes, but there are also conscious or unconscious private purposes (like Lady Mallalieu's unconscious purpose of not wandering down Fetter Lane naked in the middle of winter).

Where a particular aspect of a person's health is involved though, the expenditure may be incurred wholly and exclusively for business purposes. In Prince v Mapp (see BIM37945), it was accepted that the only reason that Harry Prince had his surgery was so that he could play his guitar.

If he'd only wanted to play his guitar professionally, his claim for his medical expense would have succeeded. His claim only failed because he also wanted to continue to playing the guitar as a hobby.

In the FTT case of Parsons (which considered both Norman v Golder and Prince v Mapp), a stunt man's claims for the costs of a private operation on his knee, for cosmetic dentistry and for chiropracty/massage were accepted by the tribunal as being incurred wholly and exclusively for business purposes.

In the case of the knee operation (which he could have had for free on the NHS) the purpose of the expenditure was to return the business's sole (self-)employee to active duty more quickly.

The cosmetic dentistry was only required because of the nature of the business and the need for chiropracty and massage only arose when he was working.

Because the OP's client could otherwise just use glasses or contact lenses, you might get him past the wholly and exclusively test.

Personally, I don't accept HMRC's capital argument for training, although they have successfully argued it in front of the Special Commissioners in the case of Dass.

If you are the proprietor of an accountancy practice, for example, and you don't currently have anybody with the skills to advise on estate planning, you might then send an ordinary staff member off to do the STEP exams, so that you will then have the skills in house.

In that case, there's no capital asset and the expenditure is incurred wholly and exclusively for the purposes of the business. HMRC accept that (see BIM47080).

So why's it different for the proprietor. A sole-trader wears two hats just as a company owner-manager does. He's both proprietor of and employee in the business. Just like an ordinary employee, to the extent that the training benefits the individual, that isn't an asset of the business that's an asset of the individual who works in the business (and in the case of the proprietor happens to own it).

There's a wholly and exclusively angle, but if the personal benefits are only incidental to wholly business objectives of the expenditure, the claim should succeed.

In Dass, he was an English tutor who also dabble in advising people on bringing appeals before immigration and human rights tribunals. He was pursuing an initial legal qualification. It would have allowed him to represent people before tribunal, but it would also have allowed him to go on to qualify as a solicitor.

The case wasn't well argued by Mr Dass, meaning that the special commissioner accepted HMRC's arguments, but his acceptance of the expenditure as capital was based on that it afforded Mr Dass with "the ability to venture into new areas of practice", completely unconnected with the Englsh tuition and with only a tenuous connection with the lesser activity of advising on appeals.

The proper analysis, in my view, is that the purpose of the expenditure was to enable Mr Dass to pursue a business far wider than the existing business.

I don't believe that it goes so far as to support HMRC's assertions in BIM35660, particularly the closing paragraph. I accept though that the Dass decision is consistent with some of their assertions, on a proper analysis.

In the OP's case, I think that there is a good argument that the purpose of the expenditure is to expand the existing business into a new area, IF the existing "transport business" is a business of transporting people. If it's a road haulage business, I'm then in the "no chance" camp.

In the former case, I think the OP has a basis to make a claim with a suitable white space disclosure to flag it for HMRC. If HMRC take issue, some argument should be offered, but I don't imagine the amount of tax involved will warrant taking it to tribunal. The client can be made aware that that's the situation.

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Stepurhan
By stepurhan
14th May 2014 11:37

Oh the irony

Brilliantly comprehensive response as always Steve

I just had to have a little chuckle to myself over the Dass case. Given he was pursuing a legal qualification, it is a bit unfortunate that

Steve Kesby wrote:
The case wasn't well argued by Mr Dass

or was this a cunning plot to show that he was clearly not up to pursuing a separate career as a solicitor?

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By nick farrow
14th May 2014 12:25

what was wrong with spectacles

what was wrong with the spectacles? I have had laser eye surgery and although I was very please with it my night vision for driving was a bit worse than with glasses

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By youngloch
14th May 2014 17:40

Excellent as always fellow members!

Firstly, yes I stand corrected it's wholly and exclusively, that was in fact the original title and then in a moment of madness I edited it! I have re-edited it now but alas your comments will expose my error to all those who stumble upon the thread in the future (and no doubt message me to see if a claim was made and if it was successful!)

I think it's the ability to get excited about an issue such as this that makes us accountants in the first place. What at first was a throw away "no chance" became, through a process I suppose of arguing it out with myself in front of the client (which he found very entertaining!), a "hold on there might be a slim chance" issue.

The uncorrected vision does indeed relate to the fact that his eyesight without glasses/lenses must be a certain standard hence, for him, laser surgery is the only way he can get this licence. In response to Nick Farrow, yes he can see with spectacles but so bad is his natural eyesight that he will not get the licence without having surgery.

From talking to him it is clear that the idea of having his eye peeled away and reshaped by lasers is not something he wants to do but may have to do for the purpose of the trade so that is where the wholly and exclusively comes in.

Were it not for the business there is no way on earth he would want this done, if he did he would have done it years ago with his vision - it is not as if this is now new technology.

However from a point of debate in regards to Steve's final point - were his business distinct from transporting people then are we saying that the surgery expense could not be claimed simply because it is a NEW trade? And is Dass the deciding factor?

Just goes to show that we should never instantly dismiss something..........

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By Steve Kesby
15th May 2014 11:34

Yes

I think that where an expense is incurred to enable a person to carry out a particular business, like qualifying as a solicitor in order to practice as a solicitor, it can't be said to be for the purposes of the business, but for the purposes of the individual to carry on the business.

That, I think, was what should have been the analysis in Dass.

Where a person running a passenger transport business, wants to make some logical expansion of that existing business, like training for a PSV licence, for example, that's an expense of the existing business to make that logical expansion.

So if your client ran a minicab business, the move into chauffeured limousines would be a logical extension and the laser eye surgery could be argued to be for that purpose (and it doesn't create a capital asset for the business, but an incidental benefit to the proprietor, in my view).

In that case, claim it and make the white space disclosure.

If it were a road haulage business though, the move isn't a logical extension of the existing business; it's a new business and the logic from my first paragraph (if it's logic!) applies. In that case, I'd consider any claim to be questionable.

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