Business training costs -when are training courses tax deductible

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Introduction 

As a contractor or UK business owner, when is training a business expense and can I claim tax relief on training courses? In addition, as a UK contractor, when can you write off training as a business expense for your company? This is an important question as contractors and UK business owners will incur business training costs when they take courses as and when the need arises. Therefore, in this article we will look at when and how to claim professional training expenses on taxes.

As part of your day-to-day work in the business world, you may need to brush up on your skills from time to time. Improving an existing talent or skills will assist with your personal development and may give you a crucial edge when you apply for new contracts. Part of this may involve taking part in some business training courses and exams in connection with this. Such courses and exams will form part of your business training costs.

Therefore, how do I claim professional training expenses on taxes? Important to note, if you know what types of training you can claim as business expenses when you run your own company, this is good.

Initial considerations -are courses tax-deductible?

First, most employers will train employees from time to time. Notably, business training courses take place in all types of industries. Employee training should enhance an employee’s business skills and expertise, as well as their performance. As a UK contractor, if we look at when are training courses tax-deductible (UK), the training and development must be relevant to your work and existing skill. Therefore, the course can enhance the current skills that relate to your existing line of work. It can also teach you some new skills relevant to your work.

As a business owner, when you undertake the training, it should help lead to future income for your limited company. You could set a training budget, and the courses you undertake should help increase your expertise. The improved skills you attain should also assist you in performing better. This is all to the advantage of your business and its future.

If you run your own company, there is some flexibility here. When considering can you deduct training as a business expense, you need to look at the type of training and also consider the outcome. It would help if you aimed to take training courses that improve your soft skills, such as management and leadership.

In a perfect world, the training you take on should be relevant to your work. If the business training meets the above criteria, you can claim these as a business expense and receive tax relief on training courses.

Business training -the types of training costs 

If we look at when are training costs tax-deductible, the types of business courses and training programs that you may claim for as a contractor could cover a wide range and may include:

  • Project management course.
  • Business management training.
  • Management training.
  • Health and safety course.
  • Skills course.
  • Time management training.
  • Sales techniques.
  • Writing course.

You may intend to undertake a project management course or business management course. Alternatively, you take another course above or one not listed here. When you have chosen your course, you could participate in one or more via a distance learning course. You could also do this through a website or social media, as these are becoming more popular nowadays. Many professionals today will take online courses to brush up on their skills.

Training materials

Besides the actual training costs and considering is the training course tax-deductible, you may also incur the expense of training materials such as textbooks or training manuals. These may be paper copies; however, as is common nowadays, you can usually view them online.

The cost of the training materials will be tax deductible if they meet HM Revenue & Customs (HMRC) tests -please later in the article.

A University course / MBA

Are MBA fees tax-deductible? It may be the case that you undertake a university course, Masters or MBA as part of your training costs. This type of training may enable you to learn a new skill.

In many cases however, it could be shown that these types of training are not relevant to your business’s services. For that reason, you cannot claim this as a business expense. Instead, you may be able to pay for the fees through your business, and you could treat this as a capital expense. As a result, your business will not receive tax relief.

Please see BIM35660 for the difference between revenue versus capital outlays.

Business training -keeping records

It would be advisable to note why you think the expense is a business one now. Doing this would help because your business’s prime concerns might change over time. It may be the case that you need to justify to HMRC a specific course that you did a few years ago. Also, the business focus may change in the future when you are contracting or possibly when you are no longer contracting.

Keeping notes about the training expenses will help if you receive a query from HMRC concerning your claims from a few years ago. 

Business training -HMRC’s specific guidelines 

Specific deductions: admin: own training courses

We are looking into can you claim training as a business expense and is training tax-deductible? For example, are professional development courses tax-deductible? In HMRC’s words:

`you must incur the training cost wholly and exclusively for the trade. The business training should be for a trade that you carry out at the time when you take on the training. The costs of training courses that you attend as the owner of a business (either as a sole trader or in partnership with others), which will update your skills and professional expertise, are normally a business expense. In turn, you can deduct these from the profits of your business. Please see BIM35660 for further details.

Therefore, we read from the above that tax relief is available for training expenses however only when the training is `wholly and exclusively’ for business purposes.

Business purpose test

When you consider the question of purpose, please think about this. You should not take an unduly narrow view of whether the content of any course only updates the individual’s current skills. It may be clear that, for example, you acquire an entirely new skill or qualification due to the expense. In this case, it is not likely that the training cost will be wholly and exclusively for the existing trade.

Furthermore, for general information on the business purpose, please see BIM37050. 

Capital test 

Please note that expenditure on new skills may also be capital if you acquire an identifiable asset of sufficient substance and endurance.

Please see Dass v Special Commissioner and others [2006] EWHC2491 (Ch), and BIM35660.

Final thoughts

Business training costs to update your skills and knowledge are essential in any industry. Indeed, as a UK contractor, you may take on training relevant to the work you perform through your company. If you do, you can claim this because it will continue to help your company create more income in the future.

As with any business expenses, you should ensure that the training provider invoices the cost of the training to your business.

Link to Contractor Advice UK group on

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Published On: August 1st, 2022 / Categories: Expenses, Expenses Guides, First timer guide /

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