NHS Doctors Job Expenses – Mr Kunjur Vs HMRC

This case involves an appeal by HMRC against a decision of the First-tier Tribunal (Tax Chamber) allowing an appeal in part by Mr Jayanth Kunjur against income tax assessments and a closure notice for the tax years 2012-13 to 2016-17.

Mr Kunjur was a junior doctor working at St George’s Hospital in London during the relevant tax years, while his family home was in Southampton, where his wife and children lived. He rented accommodation in Colliers Wood near the hospital and claimed tax relief for the rental costs. HMRC disallowed the claims, issued tax assessments charging the tax due, and imposed penalties.

Mr Kunjur appealed to the First-tier Tribunal. The tribunal held that he was entitled to relief for a proportion of the rental costs corresponding to the amount of time he spent at the rented premises carrying out the duties of his employment. In particular, the tribunal found that:

• Mr Kunjur was contractually required to be on-call within 30 minutes of travel time from the hospital for certain shifts. It was not reasonable to expect him to use hospital accommodation for students or to uproot his family. He, therefore, rented nearby accommodation out of professional obligation to his patients.
• When Mr Kunjur was physically present in the hospital while on-call or at the rented premises taking calls and giving advice while informally on-call, the accommodation was used in performing his employment duties.
• Mr Kunjur also used the premises to conduct research required for his employment.
• The accommodation, therefore, served both personal and employment purposes. The tribunal considered the costs could be apportioned.

HMRC was granted permission to appeal on three grounds:

1. The tribunal erred in finding Mr Kunjur was obliged to incur the expenditure as holder of the employment. The need to rent premises arose from his personal circumstances, not the nature of the employment.
2. The tribunal erred in finding that the expenditure was wholly and exclusively incurred in performing his duties. The premises served a dual personal and employment purpose.
3. The tribunal erred in finding that the expenditure was incurred in performing his duties. The costs provided him accommodation to work from but were not incurred while performing duties.

Summary of Upper Tribunal Decision

The Upper Tribunal allowed HMRC’s appeal on all three grounds and held that Mr Kunjur was not entitled to any tax relief on the rental expenditure.

On the first ground, the Upper Tribunal held the test is objective – whether the nature of the employment would oblige any holder of the role to incur such costs. Thidifferente case here. Mr Kunjur rented the premises due to the personal circumstances of his family living in Southampton. Other employees living nearby would not incur such costs.

On the second ground, the Upper Tribunal held that the accommodation served a dual purpose, and Mr Kunjur obtained more than an incidental personal benefit. The legislation requires expenditure to be incurred ‘wholly and exclusively’ in performing employment duties to qualify for relief. Apportionment is not permitted if there is a dual purpose.

On the third ground, the Upper Tribunal drew a distinction between expenditure enabling a taxpayer to perform duties versus expenditure directly incurred while undertaking those duties—commuting costs or finding accommodation to work from fall into the former category. Relief is not available for costs incurred before or after duties are performed.

The Upper Tribunal, therefore, dismissed Mr Kunjur’s appeal and restored the tax assessments.

Analysis

Obligation to Incur Expenditure

The first requirement for tax relief under the legislation is that the employee is ‘obliged’ to incur the expenditure ‘as holder of the employment’. The Upper Tribunal correctly held that this imposes an objective test focused on the nature of the employment itself. The need to incur costs cannot arise merely from the personal circumstances or choices of the individual employee.

This reflects long-established case law emphasizing the expenses must arise ‘ex necessitate’ of the office or employment. Personal factors particular to the taxpayer cannot create a deduction – it must be a universal obligation tied to the role. This objective approach can be seen in cases like Ricketts v Colquhoun and Owen v Pook.

The Upper Tribunal was right to find that Mr Kunjur’s need for London accommodation did not arise from the nature of his role but rather his personal position of his family living in Southampton. The tribunal wrongly focused on whether it was reasonable to expect Mr Kunjur to use alternatives. But reasonableness or convenience for a particular employee is not the right test.

However, an argument can be made that a wider interpretation is needed for modern employment relationships and expectations of mobility. Travel requirements are often built into roles. There is scope to extend the protection of the tax relief to temporarily cover employees who must live away from their family home due to the location requirements of their work. But this would likely require legislative amendment rather than a new judicial interpretation.

Wholly and Exclusively

The Upper Tribunal correctly held that tax relief was unavailable because the rental accommodation served personal and employment purposes. Where expenditure has a dual purpose, there must be no more than an incidental private benefit for the employee.

The relevant case law establishes a strict approach. If expenditure serves both a business and personal purpose, no relief is due, even if the business purpose predominates. Apportionment between the two purposes is not permitted. As held in Mallalieu v Drummond, this reflects the clear statutory wording requiring expenses to be incurred ‘wholly and exclusively‘ for employment.

This could be criticized as unduly harsh, where employees must live away from home temporarily for genuine business needs. Accommodation will always confer some personal benefit. A de minimis non-incidental private purpose denies all relief, even if 95% of the use is business-related. But as the Upper Tribunal held, any more flexible apportionment approach requires legislative reform.

Performance of Duties

The third requirement is that expenses must be incurred ‘in performing the duties’ of the employment. The Upper Tribunal followed case law establishing a distinction between:

• Expenditure incurred while undertaking duties – relievable
• Expenditure enabling duties to be performed – not relievable.

The costs of the rented accommodation fall into the second category. As held in Elderkin v Hindmarsh, expenditures that put the employee in a position to commence duties, or provide the facilities needed to do the work, are preparatory costs. They may be necessary but are not incurred in the direct execution of duties.

This distinction can lead to fine and debatable judgment calls in particular cases. Expenses incurred working from home are one area where the boundary has shifted. But the principle remains that ordinary living and commuting costs are treated as personal. Mr Kunjur’s rental costs had the character of living expenses rather than direct business costs. The Upper Tribunal was right to deny relief by applying the long-established authority in this area.

Conclusion

In dismissing Mr Kunjur’s appeal, the Upper Tribunal reached the legally correct outcome based on the existing case law and the strict wording of the tax relief provisions. To obtain relief, expenses must:

• Arise from the innate requirements of the employment rather than an employee’s personal circumstances
• Be incurred wholly and exclusively for employment purposes without any substantial private benefit
• Relate directly to the performance of duties rather than preparatory costs enabling work to be done.

Mr Kunjur’s rental costs only partially satisfied these conditions. The decision confirms that expenses of travel, accommodation and ordinary living costs incurred for work will generally fail to qualify, absent very specific circumstances or contractual requirements making them indispensable to the employment itself.

However, this does highlight potential issues of unfairness in the tax system. Employees required to take on temporary postings away from their family home are left out of pocket, unlike the self-employed, who can deduct equivalent business expenses. There is a case to expand access to tax relief in these situations through statutory reform. But the Upper Tribunal had no scope to depart from the strict binding interpretation of the Whileverall; while sympathetic to Mr Kunjur’s position, the Upper Tribunal reached the correct decision on the law and application of precedent to the facts.

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