Tax relief on training courses

Share This Guide, Choose Your Platform!

Introduction 

When is training a business expense as a UK contractor or business owner running your own company? Indeed, if you’re a UK limited company contractor, when are training costs tax-deductible? When you work for yourself, can you write off training as a business expense for your company? Further still, when considering whether courses are tax-deductible, will they be allowable for Corporation Tax purposes? Indeed, these are key questions for UK contractors, as many will ask: can I claim tax relief on training courses? Training for business reasons is essential in any industry. Therefore, you’ll likely attend professional business training courses as a contractor with your company. As a result, you’ll incur the associated cost for any course you or your staff attend. Consequently, you may ask your contractor accountant how do I claim professional training expenses on taxes.

This guide will look at when are training costs tax-deductible (limited company) while you’re UK contracting. Moreover, we’ll consider when training courses are tax-deductible for self-employed. Besides considering whether you can claim training courses on tax, we’ll consider the different business training methods. Further to this, we’ll look at whether online courses are tax-deductible. Furthermore, we’ll consider whether you receive HMRC tax relief on training where you attend an actual contractor course in person. Another good article on this site is our guide to UK contracting. This contains many insights into tax efficiency when working through your own company.

Initial thoughts on tax relief on training courses 

Improve your skills

While contracting through your business, let’s consider how to claim professional training expenses on taxes. As part of your day-to-day work in the business world, you may have to brush up on your skills from time to time. Improving an existing talent or skills will assist with your personal development. This may give you a crucial edge when you apply for new contracts. As a result, this may involve taking part in some professional training courses. Moreover, you may have to take some contractor examinations regarding this. Also, your training in business will likely include contractor courses and professional exams for contractors. Indeed, these will form part of your overall business training costs.

Therefore, when are training costs allowable for Corporation Tax? Also, as a professional, how do I claim professional training expenses on taxes? Most importantly, knowing what types of training you can claim as business expenses is good when you run your own company.

Is training a business expense? 

When we consider undertaking a contractor training course, we should first look at when is training tax-deductible (UK). First, most employers will train employees from time to time and incur employee training costs. What’s more, training courses take place in all types of industries in the UK. When an employer pays for staff training, it should help improve employees’ business skills, expertise, credentials, and overall performance. However, when is a training cost tax-deductible for a UK contractor in business?

In business, if we look at when are training courses tax-deductible (UK) for limited company contractors, the training and development must be relevant to your work and existing skills. Therefore, when considering whether courses are tax-deductible and when you receive tax relief for training courses, the course must enhance the skills related to your existing line of work. Further still, the course should teach you some new skills relevant to your work.

Benefit your business

As a business owner, undertaking work-related training should benefit the company in the long term. As a UK contractor, this should help lead to future income for your contractor limited company. You could set a training budget, and the courses you undertake should help increase your expertise. What’s more, the improved skills you attain should assist you in performing better. This is all to the advantage of your business and its future.

Tax relief on training courses & what are HMRC’s specific guidelines? 

Specific deductions: admin: own training courses

This guide examines whether you can claim training as a business expense and whether training is tax-deductible. Therefore, are professional development courses tax-deductible? In HMRC’s own words, concerning when are training costs tax-deductible:

You must incur the training cost wholly and exclusively for the trade. The business training should be for a trade you carry out when you take the training. The costs of training courses you attend as the owner of a business (either as a limited company owner, a sole trader or in partnership with others), which will update your skills and professional expertise, are usually a business expense. In turn, you can deduct these from the profits of your business. Please see BIM35660 for further details regarding where HMRC states you can receive tax relief on professional training courses.

Therefore, we read above that training tax relief is available for business training courses (UK) costs. However, this only applies when the training is `wholly and exclusively’ for business purposes. Therefore, a key factor is whether the training benefits the company in the future. If it can be proved that the training wasn’t for your business activities, it’s treated as a Benefit in Kind. 

Business purpose test

When you consider the question of purpose about whether you can claim training costs against tax, 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 evident, for example, that you acquire an entirely new skill or qualification due to the expense. In this case, it’s not likely the training cost is wholly and exclusively for the existing trade.

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

Capital test 

It’s essential to remember that expenditures on new skills may be regarded as capital expenses. Indeed, this applies if you acquire an identifiable asset of sufficient substance and endurance.

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

How do you claim training expenses as a contractor or small business? 

First thoughts

If you run your own company, there’s some flexibility here regarding training courses for business.  When considering whether you can deduct training as a business expense and claim professional training expenses on taxes, you should look at the type of training and evaluate the outcome. It’ll help if you aim to take training for business courses that improve your soft skills. This will include management and leadership skills.

In a perfect world, your training should be relevant to your work. Indeed, if you work in IT, this could be a contractor IT course in your skill. If the business training course meets the above criteria, you can claim it as a business training expense. Furthermore, if you attend several courses and they meet the requirements, you’ll receive tax relief on training courses.

The types of training costs for contractors & how can you receive Tax relief on training courses? 

Let’s now consider training as a business expense, and at what point are training costs tax-deductible? Indeed, the types of training courses claimable as a UK contractor could cover a wide range and may include:

  • Contractor IT training. Indeed, this could consist of contractor IT courses relevant to your skill set.
  • Project management course.
  • Business management training.
  • Management training.
  • Health and safety course.
  • Skills course.
  • Time management training.
  • Sales techniques.
  • Writing course.

You may undertake a professional course in project management or business management. On the other hand, you may take another course from the list above. Further still, you may take a course not listed above, such as professional IT training for business. When you’ve chosen your business professional training course, you could participate in one or more via a distance learning course. Indeed, you could also do this through a website or social media. What’s more, these are becoming more popular nowadays. Furthermore, many professionals today will incur online training costs when they undertake online business courses to improve their skills.

Can you claim training materials?

Besides the cost of the training courses and considering if the training course is tax-deductible, you may incur the expense of training materials. These include textbooks or training manuals. What’s more, these may even be paper copies. However, as is common nowadays, you can usually view them online.

Besides receiving tax relief on training courses, the cost of the training materials is tax-deductible. However, this is provided they meet HM Revenue & Customs (HMRC) tests (please see later in this guide).

University course / MBA

When we research can you claim professional training expenses on taxes, are MBA fees tax-deductible? It may be the case you undertake a university course, Masters, or MBA as part of your training. This business training course may enable you to learn a new skill.

In many cases, however, it could be shown these types of training aren’t relevant to your business’s services. For this reason, you can’t claim this as a business expense or a training expense tax deduction. Instead, you may be able to pay for the fees through your business and treat this as capital expenditure. As a result, your business won’t receive a training tax deduction.

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

More thoughts on business training

Self-employed training expenses

If you’re self-employed, HMRC has guides on what you can claim for training courses. They have a further guide on what to report if your training isn’t tax-exempt. HMRC customer forums also have a page dedicated to training courses with questions from the public.

How to keep business records for tax relief on training courses 

When claiming training expenses on tax, it’s advisable to note why you think the cost is a business one. Doing this now would help because your business’s prime concerns might change over time. It may be that you must justify to HMRC a specific course you took a few years ago. Also, the business focus may change in the future. Indeed, this could be when you’re contracting or possibly when you’re no longer contracting.

Keeping notes about the training expenses will help if you receive a query from HMRC. An enquiry from HMRC could concern your claims from a few years ago. Therefore, it’s good to have proper records.

Can you claim VAT on training courses (UK)?

If you run your business and are VAT registered, you can claim VAT on any VAT-inclusive expenses. When you undertake training courses, you may be charged VAT depending on which courses you take and with whom you take them. Therefore, if the training suppliers charge VAT and the courses are allowable as business expenses, you can claim the VAT on training courses. 

Final thoughts

When we consider whether you can deduct training from your taxes, we’ve covered all the existing rules in this guide. What’s more, we’ve taken the time to consider how do I claim professional training expenses on taxes and when you receive HMRC tax relief on training. As a contractor, we’ve also looked at when you can claim for training through your business and when such training costs are tax-deductible. Indeed, it’s vital to note the above guidelines when considering what you can claim regarding business training and when you can receive tax relief on training courses.

Professional training and courses to update your skills and knowledge are essential in any industry. Indeed, as a UK contractor, you may take on a business training course or professional courses for contractors relevant to the work you perform through your company. If you do, you can claim the professional training expenses on taxes because it will continue to help your company create more future income.

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

Link to Contractor Advice UK group on

LinkedIn    https://www.linkedin.com/groups/4660081/

Published On: April 6th, 2024 / Categories: Expenses, Expenses Guides, First timer guide /

Share This Guide, Choose Your Platform!

Leave A Comment