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The cost of rented accommodation continues to rise. In London, the average monthly rent for a new tenancy is currently £2,109, representing an annual increase of 12.9%. Other major cities are experiencing similar proportionate increases due to the combined effects of rising interest rates and limited housing stock.

This has led to much online discourse about the morality of landlords (or ‘housing providers’ as some have tried to rebrand themselves).  I don’t intend to add to this. But the rising cost of renting makes treating all or part of these expenses as tax deductible increasingly attractive. This is perhaps even more the case for those young people who move to be better located to start their career. Given the quality of some ‘affordable’ lettings, such renters may choose to return to their hometowns at weekends, with the accommodation in the major city being no more than a base during the working week.

Unfortunately, the scope for treating rental payments as a deductible expense against employment income is all but non-existent. This has been illustrated by the recent Upper Tier Tribunal (‘UTT’) decision in HMRC v Jayanth Kunjur [UT2022/000047].


Mr Kunjur (‘Mr K’) was a practising dental surgeon. He was based with his family in Southampton, but accepted a position at St George’s Hospital in London to carry out on-the-job training to become a maxillofacial surgeon.

The new role included contractual requirements for Mr K to be on-call two nights each week and one weekend in six, as well as carrying out daily duties at the hospital. On those nights he was not formally on-call, Mr K would be contacted for his input on any maxillofacial patients. Mr K therefore considered that he was permanently on-call, whether on an informal or formal basis.

St George’s stipulated that Mr K (and all other surgeons) needed to have accommodation within 30 minutes of the hospital in order to discharge their ‘formal’ on call duties. It was not feasible for Mr K to uproot his family from Southampton. Instead, he rented ‘modest accommodation’ in Colliers Wood.  Mr K did not consider Colliers Wood an attractive place to live and he did not invite his family to visit. The accommodation, however, was preferable to a hotel or university accommodation in that it provided the ‘peace, quiet and stability, that were necessary for Mr K to discharge his duties as a trainee maxillofacial surgeon’.

In the 2012-13 – 2016/17 tax years, Mr K claimed relief for the expenditure on the Colliers Wood accommodation against his employment income.  This was on the basis that he considered the expenditure fell within s336(1) ITEPA 2003:

  • The general rule is that a deduction from earnings is allowed for an amount if –

1. the employee is obliged to incur and pay it as holder of the employment, and

2. the amount is incurred wholly, exclusively and necessarily in the performance of the duties of the employment.

The test has three elements, being:

  • the employee must be obliged to incur the expenditure as the holder of employment;
  • the expenditure must be wholly and exclusively due to the employment (i.e. with no private benefit – the ‘wholly and exclusively test’); and
  • the expenditure must be necessarily incurred in the performance of the duties of the employment.

HMRC challenged the deduction claimed by Mr K, and the case was taken to the First Tier Tribunal (‘FTT’).  Mr K enjoyed some success. The FTT permitted a deduction for a proportion of the expenditure on the accommodation to the extent it related to time spent by Mr K giving advice from the accommodation while either formally or informally on-call.  This element of the expenditure was deemed by the FTT to satisfy each of the above tests.

The UTT decision

HMRC appealed to the UTT.  Unfortunately for Mr K (and those taxpayers in similar circumstances), the UTT held that the FTT erred in its application of each of the above three tests.

In considering whether Mr K had been obliged to incur the expenditure as holder of his employment, the UTT held that the test was an objective one.  The expense must arise from the employment and not be the result of a personal choice of the taxpayer.

Mr K’s employment with St George’s required him to have accommodation within 30 minutes of the hospital when formally on-call. The expenditure on the Colliers Wood accommodation was, however, incurred due to Mr K’s personal choice of basing his family in Southampton and not wishing to relocate. Other employees in the same role as Mr K would not have had to incur the expenditure where they already resided or permanently relocated to Colliers Wood or the surrounding area. The expenditure incurred by Mr K could not therefore be said to have been an obligation of the employment when applying the test in an objective way.

When applying the ‘wholly and exclusively’ test, the UTT considered that the FTT had been incorrect to find that the obtaining of a private benefit (such as security or privacy) had not been one of the objects of the expenditure on the Colliers Wood accommodation.

The UTT referred to cases concerning ‘professional’ clothing. In those cases, incurring the expenditure had dual purposes – the employment or trade related purpose of appearing in a way that suited the taxpayer’s duties and the more fundamental purpose of providing warmth and modesty. These two sets of purposes were said to be ‘intermingled’. The expenditure could not therefore be held to have been incurred wholly and exclusively for the employment or trade related purposes.

Mr K’s expenditure on the Colliers Wood accommodation was held to have the same intermingled purposes. The non-employment related purposes were not held to be incidental to (or effects of) the employment related purpose. The UTT therefore concluded that the expenditure on the Colliers Wood accommodation did not satisfy the wholly and exclusively test.

When considering whether the expenditure was incurred in the performance of Mr K’s duties, the UTT held that a distinction must be drawn between expenditure which puts a person in a position to do their duties and expenditure incurred in carrying out those duties.

Mr K’s accommodation put him in a position to perform his duties, by locating him near to St George’s Hospital. The UTT accepted that Mr K did in fact perform some duties from the accommodation when he was formally or informally on-call. This was, however, held to be an incidental effect of the expenditure. The accommodation provided Mr K with a setting from which he could do a range of things, one of which was the taking of calls when on-call. This was not sufficient to mean the expenditure was incurred in the performance of those duties.


The tests in s336(1) are cumulative. It would only have been necessary for Mr K to have failed one test for HMRC to succeed in their appeal. The fact that the UTT found in HMRC’s favour on each test means that their victory is categorical. It leaves little scope for taxpayers to treat rental expenditure as a deductible expense against their employment income.

Mr K and other taxpayers who find themselves living away from their home-town due to them focusing on their future careers will no doubt consider this to be an unsympathetic decision. People enhancing their careers may lead to increased tax revenues through PAYE or the ‘multiplication factor’ of greater spending power. This is perhaps too tenuous, however, to justify the government subsidising accommodation expenses through tax deductions.

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