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Osborne: Tribunal takes a dive into allowable expenditure

25 November 2020. Published by Harry Smith, Senior Associate

In Robert John Osborne v HMRC [2020] UKFTT 373 (TC), the First-tier Tribunal (FTT) held that expenditure on fitness training was allowed because it was wholly and exclusively incurred for the purpose of the taxpayer's occupation as a saturation diver.


The taxpayer worked as a saturation diver.  This involved remaining in a pressurised environment for potentially weeks at a time and required a very high level of physical fitness that was tested against specified standards based on age and diving type, with testing prescribed by the industry and contractors for whom the taxpayer worked. The type of training undertaken by the taxpayer in order to meet the required standards of fitness was not, however, specified.

The taxpayer claimed, as deductions in his tax return, expenditure on gym membership fees and mileage expenses for travel in connection with his fitness training regime. HMRC disallowed the expenditure under section 34, Income Tax (Trading and Other Income) Act 2005 (ITTOIA), because it was not wholly and exclusively for the purpose of the taxpayer's occupation.

HMRC argued that there was necessarily a duality of purpose in fitness training as it provided the taxpayer with a personal benefit as a living human being. Therefore, unless the fitness training was of a special character dictated by the occupation and specific to the taxpayer's occupation, the expenditure must be disallowed. 

The taxpayer appealed.


Section 34, ITTOIA, provides that 'in calculating the profits of a trade, no deduction is allowed for … expenses not incurred wholly and exclusively for the purposes of the trade', and that '[i]f an expense is incurred for more than one purpose, this section does not prohibit a deduction for any identifiable part or identifiable proportion of the expense which is incurred wholly and exclusively for the purposes of the trade.'  

Section 15, ITTOIA, deems the operations of those engaged as divers or diving supervisors on the UK Continental Shelf to be the carrying on of a trade, for income tax purposes.  

FTT decision

The appeal was allowed.

The FTT noted that saturation diving is dangerous and fatalities can be attributable to divers being insufficiently physically fit.  Different levels of fitness were prescribed by industry bodies for different levels of diving and saturation diving was at the top end of the scale.

The taxpayer was contractually obliged to maintain a fitness level with a minimum direct VO2Max level of 44mls of oxygen per kilo of body weight per minute, without his heart rate exceeding 138.4 beats per minute (and this was tested at medical examinations, failure to submit to which would give the party engaging him the right to terminate the taxpayer's contract without notice).  The taxpayer consulted a diving doctor and gym instructor on the training regime necessary to achieve this level of fitness.  They also advised him on methods of minimising the damage to the cartilage in his joints that was caused by remaining under pressure for days at a time, and diving to depths of 150m.

It was immaterial, for income tax purposes, whether the taxpayer was employed or self-employed, due to the operation of section 15 ITTOIA.  Since the relevant test for deductibility of expenditure was 'wholly and exclusively', rather than the narrower 'wholly exclusively and necessarily' test relevant to employment income.

The FTT reviewed some of the case law relating to deductions, including the well-known case of Mallalieu v Drummond [1983] 2 AC 861 (where a barrister claimed a deduction for black suits purchased for court wear), Hillyer v Leeke [1976] STC 490 (where an IT engineer claimed deductions for a suit to wear while visiting customers) and Parsons v RCC [2010] UKFTT 110 (where a stunt performer claimed to deduct medical expenses).  

The FTT drew from these cases a requirement to make detailed findings of fact about the fitness training and how it related to the physical necessities of the occupation, as well as the taxpayer's motive in incurring the expenditure.  

The FTT concluded that the taxpayer's only motive for his fitness training was to maintain the level of lung, heart and muscular fitness to work safely as a saturation diver.  It found that he would not train for 2-3 ours a day if he did not need to do so in order to work as a saturation diver; his fitness regime was designed to cause the minimum additional damage to his joints and to have the optimum effect on his lung capacity for work purposes.  Any improvement in his fitness was, in the view of the FTT, incidental to the benefits to him in his capacity as a saturation diver.   


In arriving at its decision, the FTT noted that section 34, ITTOIA, required it to consider whether the exclusive purpose of the taxpayer's fitness training was to meet the physical necessities of his occupation and it did not require the fitness training to be specified, or expected by a third party. The taxpayer's only purpose in undertaking his fitness training was to enable him to do his physically challenging job. The taxpayer would not train for two to three hours each day if he did not need to do so in order to enable him to do his job. His training regime was so far removed from his personal physical needs there could be no duality of purpose.

Although unlikely to be of broad relevance because of the specific fact pattern, the conclusion reached that there will not necessarily be duality of purpose in fitness training, may be of wider interest, especially to the likes of professional athletes.

The decision can be viewed here.

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