Is my training tax deductible? 1

Training Practice Workshop Mentoring Learning Concept

Training courses can be expensive, in this blog we are going to focus on the self employed.

The key rules are contained in BIM42526

Specific deductions: administration: own training courses

Provided it is incurred wholly and exclusively for the purposes of the trade carried on by the individual at the time the training is undertaken, expenditure on training courses attended by the proprietor of a business (either as a sole trader, or in partnership with others) with the purpose of up-dating their skills and professional expertise is normally revenue expenditure, which is deductible from the profits of the business.

Business purpose test

In considering the question of purpose, you should not take an unduly narrow view of whether the content of any particular course only up-dates existing skills of the individual. But if it is clear that, for example, a completely new specialisation or qualification will be acquired as a result of the expenditure, it is unlikely that the expenditure will be wholly and exclusively for the purposes of the existing trade.

Capital test

Expenditure on new skills etc may also be capital if what is acquired can be viewed as an identifiable asset of sufficient substance and endurance. See Dass v Special Commissioner and others [2006] EWHC2491 (Ch)

Let’s take the example of Property Courses

There are many property courses available for investors, often the investors are self employed/sole traders/individual investors, the courses can cost thousands.

What courses are claimable:

  • Improving your skills – for example you have a basic understanding of finances but want improve your knowledge of tax

What courses are not claimable:

  • Beginners Day/Novice Courses – any course for beginners or novices would suggest you have no previous knowledge so they won’t be allowed
  • New Skills – you want to learn something new for example you currently let property and want to learn how to do property development

If the course is disallowed the travel costs will also be disallowed

What about companies?

The rules for companies are much easier to comply with and written with a much wider scope..

Income Tax (Earnings and Pensions) Act 2003

Section 250 Exemption of work-related training provision

(1)No liability to income tax arises by virtue of—

(a)the provision for an employee of work-related training or any benefit incidental to such training, or

(b)the payment or reimbursement to or in respect of an employee of—

(i)the cost of work-related training or of any benefit incidental to such training, or

(ii)any costs of a kind specified in subsection (2) in respect of such training.

(2)The costs are—

(a)costs which are incidental to the employee undertaking the training,

(b)expenses incurred in connection with an examination or other assessment of what the employee has gained from the training, and

(c)the cost of obtaining any qualification, registration or award to which the employee becomes or may become entitled as a result of the training or such an examination or other assessment.

Section 251 Meaning of “work-related training”

(1)In this Chapter “work-related training”, in relation to an employee, means a training course or other activity designed to impart, instil, improve or reinforce any knowledge, skills or personal qualities which—

(a)are likely to prove useful to the employee when performing the duties of the employment or a related employment, or

(b)will qualify or better qualify the employee—

(i)to perform those duties, or

(ii)to participate in any charitable or voluntary activities that are available to be performed in association with the employment or a related employment.

(2)For this purpose “related employment”, in relation to an employee, means another employment with the same employer, or with a person connected with the employer, which the employee—

(a)is to hold,

(b)has a serious opportunity of holding, or

(c)can realistically expect to have a serious opportunity of holding in due course.

steve@bicknells.net

Why Doctors should use Salary Sacrifice for CPE 2

Young Doctor with display board

Doctors often agree to pay for their own continuing training personally because of a shortage of NHS funds but when they do pay for courses its unlikely they will be able to claim tax relief.

EIM32530 states that it is well established that employees are not entitled to an expenses deduction under Section 336 ITEPA 2003 for the expenses continuing professional education (CPE). The Commissioners and the Courts have traditionally held that the duties of trainee doctors, for the purpose of the expenses rule, are limited to the clinical work that they do for the NHS Trust by whom they are employed. Their training activities are not undertaken “in the performance of” those duties for the purpose of Section 336 . That is so even though the training activities may be compulsory, and failure to complete them may lead to the employee losing his or her professional qualifications, and/or their job.

The Commissioners and the Courts upheld that view in a number of cases, as follows:

Parikh v Sleeman (63TC75) – a hospital doctor was refused relief for the expenses of attending training courses during periods of study leave.

Snowdon v Charnock (SpC282) – a specialist registrar was refused relief for the expenses of undergoing mandatory personal psychotherapy.

Consultant Psychiatrist v CIR (SpC557) – an NHS consultant was refused relief for the expenses of CPE necessary to maintain her professional qualification.

Decadt v CRC (TL3792) – a specialist registrar was refused relief for the expenses of taking professional examinations, even though it was a condition of his employment that he should do so.

In the recent case of Revenue & Customs Commissioners v Dr Piu Banerjee ([2010] EWCA Civ. 843), the Court of Appeal accepted that a deduction for training costs incurred by an employee should be allowed if the employee was employed on a training contract where training was an intrinsic contractual duty of the employment (see also EIM32535 & EIM32546) and where any personal benefit, unlike most CPE courses, would be incidental and not therefore give rise to a dual purpose of the expenditure.

Salary Sacrifice solves this problem.

Salary sacrifice works particularly well for training because except in the most extreme cases, employees cannot claim a tax deduction for training costs that they pay personally but if the employer pays for training that is work-related:

  • the employer gets the tax deduction
  • the employee is not taxed on the cost and
  • there is no National Insurance to pay.

EIM01210 confirms this.

steve@bicknells.net

SCA Group Lead Initiative to Create Local Jobs and Bridge Skills Gaps Reply

Weymouth & Portland have the highest unemployment rate in Dorset with 3.8% of working age residents claiming benefits (September 2011). Many professionals living in the District commute out of the area and even out of the county to get to their place of work, and yet many trades, including engineering, remain in short supply of trained and qualified staff. The SCA Group, working with Weymouth College, intend to help bridge these skills gaps, while at the same time re-train existing staff at SCA and other local companies, and also local jobseekers.

SCA, a local company providing access solutions to the maritime industry, supported by Weymouth College, are leading a bid for £1m of funding from the UK Commission for Education and Skills. If funding is secured, this will mean Weymouth College can train the workforce needed to build and maintain a new offshore wind farm proposed locally but also meet the needs of a whole host of other local industrial and engineering positions.

Steve King (Managing Director SCA Group) said “We are very proud to be working with Weymouth College, re-skilling our workforce and the local community. With skills shortages in various engineering roles in the renewable market, the SCA Group are delighted to play a part in re-training local people.”

It is expected that thousands of jobs will be created during construction of the proposed wind farm project, with several hundred permanent positions becoming available once operational. SCA and Weymouth College, subject to securing this available funding, will help keep the labour force local, vital to Dorset in times of high unemployment and in keeping with a wind farm’s positive environmental impact.

Kate McGoey, Employer Engagement Lead from The Renewables Training Network, a wholly owned subsidiary of the UK’s leading trade association RenewableUK said “This is great news for upskilling Dorset’s workforce. The UK is leading the way in renewable energy with the creation of 1000s of jobs expected in the wind, wave and tidal industries over the next 10 years, both directly and across the wider supply chain. With a number of wind farms planned for Dorset and the surrounding counties, many specialist trades will be needed over the coming years”

Both the Local Enterprise Partnership and Portland Ports have a similar take. Dr Ross Kay (Dorset LEP’s Employment and Skills Board) said “This couldn’t come at a better time to help support Dorset’s unemployed and local businesses that are still suffering following the recession, and marine engineering and renewables are one of the key priorities for the Local Enterprise Partnership.”

 Sandie Wilson, Portland Port’s Environment and Planning Manager said “Marine renewables like wind, wave and tidal are most certainly the next big thing to watch out for with the environment off Dorset and the South West coast offering a globally significant energy resource.  The local area is very much in need of highly skilled and well paid jobs on an all year round basis, and we need to do everything we can to take this opportunity that the renewable industry has to offer. It is great to have something positive to look forward to that not only provides jobs but has environmental benefits too.”

Sandie Wilson and Steve King

Rob Jones, Vice Principal Enterprise and Employability at Weymouth College commented “The College is excited to be working on a project that could have such a positive impact on jobs in Dorset.  We’re confident that by working closely with SCA, we will be able to provide people with the skills to gain meaningful employment.”
 Rob Jones Weymouth College

Information

 

Statistics from Dorset for You, http://www.dorsetforyou.com/331625

 

Pictures taken 21st December 2012 at initial bid planning meeting:

Rob Jones, Vice Principal from Weymouth College

Sandie Wilson, Environment and Planning Manager and Steve King, Managing Director of the SCA Group

When you buy an ERP system, what happens post order? Reply

Enterprise Resource Planning systems such as Microsoft Dynamics can be configured in many ways.

Prior to Order, you will probably have issued an RFP (Request for Proposal) and had a bid process. Typically a Dynamics system might start from £200k with probably half the cost or more being for consultancy.

Once you have selected your supplier, the first stage is Systems Design, I have worked on many of these, basically, you gather information on how the business works now, right down to fine detail such as how control accounts are used and what reports are currently used, then you consider what is possible with the new ERP system, what is the best way to perform tasks, how are results reported, some of the information will be flowcharted and a route map drawn up to get from where the business is now to the new ERP system. It is a highly detailed process, my reports were typically 200 pages long and the supplier and client sign off the report before configuration work starts.

Next the system experts get to work and make a mock up of the system and then workshops are done with senior management and directors to makesure the clients instructions have been correctly intrepreted, this process is then signed off.

The next stage is Training, normally immediately before the system goes live.

If you need any help let me know.

steve@bicknells.net

Training Grant of upto £1000 Reply

Matched funding is now available from Skill South East for Leadership and Management Training, the maximum funding is £1000 Grant when you spend £2000 on Training.

Provided you have at least 2 employees and can show that your business has the potential for fast growth you should qualify.

Bicknell Business Advisers are approved providers but we also have access to bartercard trainers who can provide training too.

If you want to know more drop me an e mail steve@bicknells.net