A failure to recognise this point was, in essence, the error which tainted the decision of the First-tier Tribunal (FTT) in Marlborough. In a split decision the Tribunal argued that if a payment was taxable as employment income, then it must have been incurred with a purpose of remunerating employees - even if (as the Tribunal had separately found) the evidence suggested this was not the case. This reasoning came very close to an assertion that payments taxable as employment income in the hands of employees would always be deductible for the employer and had unsurprisingly been doubted in other FTT cases - see Strategic Branding Ltd v HMRCopens in a new tab. The Upper Tribunal has now rejected it, noting that on the particular facts of this case it was undisputed that the payment was not intended to be taxable as employment income, and so inferring the purpose of the payment from that treatment was clearly flawed.
Another core distinction when applying the 'wholly and exclusively' rule is that between the purpose for doing something, and the purpose for doing it in a particular way. One may choose to walk rather than drive to the station in the morning in the hope of curbing an expanding waistline, but this does not mean that the purpose in undertaking the journey is not wholly and exclusively to get oneself to work - with any health benefits being merely incidental.
A corollary of this is that the mere fact that tax considerations influence the decision about how remuneration is provided does not automatically cause the expenditure to become non-deductible. In other words, the fact that an employer might be influenced by tax rules designed to encourage/discourage particular approaches to remunerating employees is - unsurprisingly - not fatal to relief being available. Obtaining a particular treatment in this scenario is usually no more than an incidental consequence of remuneration, which the employer is only providing in order to reward its employees.
This point has been robustly asserted on a number of occasions - including by the Court of Appeal in Hoey v HMRCopens in a new tab.
What is wrong, however, is to take this as implying that a purpose for doing something in a particular way can never be a distinct purpose for doing it. For example, the Upper Tribunal in A D Bly Groundworks firmly rejected the argument that there could never be a distinct purpose of securing tax benefits when incurring the costs of (in substance) remuneration and that it would be a misreading of Hoey to claim that it supported this idea.
In both A D Bly Groundworks and Marlborough, the conclusions ultimately reached as to the purposes for which the costs were incurred are unsurprising in the light of the particular factual findings in each case. That is perhaps the other key message which emerges from these cases: what matters for this test is the subjective purpose for which the expenditure is incurred, determined by reference to the particular facts - and that any argument which would lead to a conclusion at odds with a realistic view of the facts should probably be viewed with caution.
