As a contractor or UK business owner, can I claim for business training costs as expenses?
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. If you improve an existing skill or skills, this 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 taking exams in connection with this.
Therefore, it is good to know what types of training you can claim for as business expenses, when you are running your own company.
First of all, most employers will train their employees from time to time. Notably, business training courses take place in all types of industries. The training costs incurred should enhance the business skills and performance of an employee. As a contractor, when you claim for the cost as a business expense, the training and development has to be relevant to the work that you do. Therefore, the course can enhance the current skills that relate to your current line of work. It can also teach you some new skills that are relevant to your line of work.
As a business owner, when you undertake the training, it should help lead to future income for your business. You could set a training budget and the courses that you undertake should help increase your expertise. The improved skills you attain should also assist you to perform 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 it comes to the types of courses that you can claim, you need to consider the outcome. You should aim to take training courses that improve your soft skills, such as management and leadership.
In a perfect world, the training that you take on should be relevant to the work that you do. If the business training meets the above criteria, you can claim these as a business expense, and receive tax relief.
The types of business courses and training programs that you may claim for as a contractor, could include:
- Project management course.
- Business management training.
- Health and safety course.
- Time management training.
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 of these via a distance learning course. You could also do this through a website or social media site as these are becoming more popular nowadays. Many professionals will take part in an online course to brush up their skills.
Besides the actual course costs themselves, you may also incur the cost of training materials such as text books or training manuals. These may be paper copy or as is common nowadays you can 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
You might undertake a university course or Masters or MBA, as part of your training costs. This type of training may enable you to learn a new skill. In many cases, it could be shown that these are not relevant to the services that your business offers. For that reason, you are unable to claim for 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 of doing this, your business will not receive tax relief.
Please see BIM35660, for the difference between revenue versus capital outlays.
It would be advisable to make a note as to why you think the expense is a business one now. You need to do this because your business’s prime concerns might change over time. It may be the case that you need to justify to HMRC a certain 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.
If you keep notes about the training expenses, this will help if you receive a query from HMRC, concerning your claims from a few years ago.
HMRC’s specific guidelines
Specific deductions: admin: own training courses
It is key that you 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 (as either as a sole trader or in partnership with others), which has the purpose of making an update to your skills and professional expertise, is normally a business expense. In turn, you can deduct these from the profits of your business. Please see BIM35660 for further details
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 certain course only updates the current skills of the individual. It may be clear that, for example, you acquire a completely new skill or qualification as a result of 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 of the business purpose, please see BIM37050.
Please note, expenditure on new skills may also be capital if what you acquire is an identifiable asset of sufficient substance and endurance.
Please see Dass v Special Commissioner and others  EWHC2491 (Ch), and BIM35660.
Business training costs to update your skills and knowledge, are essential in any industry. Indeed, as a UK contractor, you may take on training that is relevant to the work that you perform through your company. If you do, you can claim for this on the basis that it will continue to help your company create more income in the future.
As with any business expenses, you should make sure that the training provider invoices the cost of the training to your business.
Link to Contractor Advice UK group on