"In the actual performance of the duties of the employment"

Second internal blog, from June 2009:

One might define 'democratic accountability' in different ways, but one facet I would have thought would be that the government is subject to the same rules as the governed. Some hope, as reflected in the case of Revenue and Customs Commissioners v Banerjee [2009] All ER (D) 203 (Jun), which calls to mind the leading news story of the past month or so. I refer, of course, to the ongoing public dispute about expenses incurred by the (questionably) honourable Members of Parliament, to which I presume readers might have seen the odd reference, unless you've just been on a particularly long and particularly exotic holiday.

The usual defence offered by the impugned Members has been that they were playing "within the rules." So that's alright then.

As it happens I dispute that they were within the rules,* but let's accept the argument for the moment. MPs have received money in addition to their basic salary via expenses. What happens to the ordinary citizen in those circumstances? One was Dr Banerjee, who worked for the overworked NHS as a consultant dermatologist. Her employment contract contained a training clause requireing her to attend meetings, courses and conferfences 'in carrying out the duties of her employment' as prescribed by her supervisor. Attend meetings etc she did, and claimed the cost on expenses. She recorded all this for income tax purposes.

The Revenue wasn't having that. They considered the expenses received constituted income, and taxed her accordingly. They relied on the forthright provision of s 198 of the Income and Corporation Taxes Act 1988, which at the material time for some of the claims provided that:

"(1) If the holder of an office or employment is necessarily obliged to incur and defray out of the emoluments of that office or employment the expenses of travelling in the performance of the duties of the office or employment or otherwise to expend money wholly, exclusively and necessarily in the performance of those duties there may be deducted from the emoluments to be assessed the expenses so necessarily incurred and defrayed."

I am pleased to report that Dr Banerjee's claim, which seems eminently reasonable, was allowed on appeal. When it reached the High Court, Henderson J said that the requirements of s 198 were 'notoriously difficult to satisfy'. He said that deduction claimed by the taxpayer had to be related to an objective necessity imposed by the duties of the employment itself, in the sense that, irrespective of what the employer might prescribe, the duties themselves involved the particular outlay. Further, the expenditure had to have been incurred in the actual performance of the duties of the employment, and it also had to have been wholly and exclusively so incurred.
As mentioned, Dr Banerjee's claims eventually satisfied that notoriously difficult test, but one is left wondering exactly how many of the well publicised indulgences of the Honourable Members would do so. It would be intriguing to know how the cost of a bath plug might have been "incurred in the actual performance of the duties of the employment", and given the family nature of this blog I won't even speculate about some of the others.

In a fair world, therefore, even if received 'within the rules' of Parliament, most MPs' claims would scarcely stand a chance of getting past the beady eye of the taxman. Except, of course, that in the unfair real world it's a different set of rules for them, so that's alright then.
*MPs think they weren't breaking the rules. The said rules are contained in the Parliamentary Green Book (the name, readers will immediately spot, being a cheap rip-off of a rather more august Lexis Nexis publication). It contains a large number of detailed rules. Presumably these are the rules with which MPs think they complied. They are, however, made subject to overriding principles, which the Green Book states must be adhered to when making claims. These include: that claims should be above reproach; that claims must only be made for expenditure that it was necessary for an MP to incur to ensure that he or she could properly perform his or her parliamentary duties; that MPs must ensure that claims do not give rise to, or give the appearance of giving rise to, an improper personal financial benefit to themselves or anyone else; that MPs are committed to openness about what expenditure has been incurred and for what purposes; and that MPs should avoid purchases which could be seen as extravagant or luxurious." (One might add "or ludicrous" which would have tripped up the 1p phone call, Lembit Opik's wig and the kit kat.)