The phrase” wholly and exclusively for the purpose of business” would means the taxpayer or company sole purpose for incurring the business expenditure is only for their trade or business. Any purposes that not related to trade or that if the business expenditure would consist of two or more business purposes would not qualify as being wholly and exclusively for the purpose of trade.
In the case of Cooke v Quick Shoe Repair Service,  30TC460, the taxpayer had purchased a shoe repair business from a vendor but the vendor was unable to …show more content…
In Strong & Co of Romsey v Woodifield  5TC215, a hotel guest in an inn owned by Strong & Co of Romsey Ltd was injured by a falling chimney while asleep. The guest was compensated later by the company due to its negligence in discharging hotel duty of care to their guests. The company whose trade was in brewery with its properties of brewers and inns wanted to claim the compensation and repair costs of the chimney as a deduction against their trade profits and was subsequently denied by the House of Lords.
Lord Davy, a member of the House of law explained in 5TC page 220 that although the compensation was related to its trade, it does not hinder Strong & Co of Romsey Ltd.’s ability to carry on and earn their profits. He would later describe that only expenditures that would affect a business to carry on and earn its profit to be deductible, not simply any expenditure that a company had paid as a result of its trade to be deductible.
The judge, Lord Chancellor, Earl Loreburn would further summarized the stator provisions and their effect in 5TC lower half of page 219 and warned that Lord Davy’s remarks might not be applicable in every situations, the nature of a company’s trade have to be considered if expenditures such as compensations would disable its operations of trade to make profits though it may not be related to its main trade in brewery at all. Strong & Co of Romsey Ltd would