The Commissioners for HMRC v Jayanth Kunjur

For a deduction under Income Tax (Earnings and Pensions) Act 2003, s 336(1), each statutory condition is cumulative. The requirement that an employee be obliged to incur expenditure as holder of the employment is objective. It excludes expenses arising from the employee’s personal circumstances or choices, even where the expense enables compliance with work requirements.

Expenditure with inseparable employment and personal purposes is not deductible by apportionment. Further, expenditure on accommodation is ordinarily incurred to place an employee in a position to perform duties, rather than in the performance of those duties. That remains so where the accommodation is used to take work calls or undertake research.

HMRC appealed from a First-tier Tribunal decision released on 7 October 2021. The FTT had allowed in part Mr Kunjur’s appeals against income-tax assessments for 2012–13 to 2016–17. It held that a proportion of rent paid for accommodation near St George’s Hospital was deductible under s 336(1) of the Income Tax (Earnings and Pensions) Act 2003.

Mr Kunjur was a junior doctor whose family home was in Southampton. He rented accommodation near the hospital while undertaking training and on-call duties. HMRC challenged the FTT’s conclusions on obligation, exclusive purpose and whether the rent was incurred in performing employment duties. Mr Kunjur withdrew from the Upper Tribunal appeal and was unrepresented.

1. Appeal allowed. The Upper Tribunal re-made the decision and dismissed Mr Kunjur’s appeal against the income-tax assessments. Rent for the premises was not deductible from his earnings under s 336(1) of the Income Tax (Earnings and Pensions) Act 2003.

2. The statutory test is cumulative. The FTT erred in treating the requirement that an employee be obliged to incur expenditure as potentially subjective. The question is objective: whether the nature of the employment obliges holders of that employment to incur expenditure of that kind. The rent arose because Mr Kunjur chose to maintain his family home in Southampton. Other employees in the same role might already live near the hospital. The availability or reasonableness of alternative accommodation, and the difficulty of moving his family, were personal considerations and irrelevant to that inquiry.

3. The FTT also erred by apportioning the rent between personal and employment use. The premises provided living accommodation during the working week. That gave the expenditure inseparable personal and employment purposes. The FTT did not find, and the facts could not support, a conclusion that the personal advantage was merely an effect incidental to an exclusively employment purpose.

4. Finally, the rent was not incurred in the performance of employment duties. Although Mr Kunjur used the premises while giving telephone advice and undertaking research, the expenditure merely put him in a position from which he could do those things. Accommodation expenses were incidental to the employment and did not constitute expenditure incurred while carrying out its duties.

• Upper Tribunal (Tax and Chancery Chamber): HMRC’s appeal was allowed. The Tribunal re-made the decision and dismissed Mr Kunjur’s appeal against the income-tax assessments.
• First-tier Tribunal (Tax Chamber): Released on 7 October 2021, it had allowed in part Mr Kunjur’s appeals against the assessments and penalty assessments. HMRC challenged only the assessments outcome.