The enactment of the Income Tax (Trading and Other Income) Act 2005 has clarified what was previously an uncertain and sometimes inconsistent application of the ‘wholly and exclusively’ principle. ITTOIA 2005, s. 34(2) states the following:

‘If an expense is incurred for more than one purpose, this section does not prohibit a deduction for any identifiable part or identifiable proportion of the expense which is incurred wholly and exclusively for the purposes of the trade.’

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