There is a summary here:
Two airline pilots received free training from their employers. Under the terms of their contracts, they would have to repay the cost of the training if they left the airline within a fixed period. Both pilots resigned their jobs, one in 1997-98 and the other in 2000-01 to join other airlines and repaid the training costs as required. They claimed this as an expense of employment in their self-assessment tax returns for the years 1997-98 and 2001-02 respectively. HMRC refused the claims saying the expense was not incurred in the performance of the taxpayers' duties under TA 1988, s 198(1). The taxpayers appealed.
The Special Commissioner noted that the wording of s 198(1) was different for the two years in question. In the old form, the taxpayer had to be 'necessarily obliged to … expend' the expenses wholly, exclusively and necessarily in the performance of his duties, while in the new form, he was 'necessarily obliged to incur and defray … any amount … expended' on them. However, the Commissioner concluded that the old form applied to the new provision in relation to expenses, other than travelling expenses. Thus for the years in question, the nature of the duties of the employment objectively viewed had to require the expense. Now it was necessary to decide what were the duties of the employment.
The appellants were both obliged to incur the expense of repaying the training fees. However, this expense was not wholly, exclusively and necessarily in the performance of the duties of the employment; rather it arose from the termination of the contract. The pilots had to repay the amount when their contracts ended, not in the performance of their duties. Thus the expense was not deductible.
Furthermore, while for the two pilots concerned, the expense was necessary, the actual nature of the job did not compel the expense, because the job was one of flying aircraft. A pilot who was already trained would not be required to incur the expense.
The taxpayers' appeals were dismissed.
Hinsley and another (SpC 569)