Training costs, what can I claim for as business expenses as a UK contractor / business owner?
As part of your work, you may need to brush up on your skills from time to time. If you improve on your skills may give you a crucial edge when you apply for new contracts. Part of this may involve taking part in some training courses and taking exams in connection with this.
Therefore, it is good to know what you can and cannot claim for as business expenses when you are running your own company.
Claiming for training expenses
First of all, training takes place in all types of industries. The costs incurred should enhance the skills and performance of an employee. The training has to be relevant to the work that you do. What’s more, when you undertake the training, it should help lead to future income for your business before you can claim. The training should improve your current skills. It should also increase your expertise and help you perform better. It 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 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 it meets the above criteria, you can claim these as a business expense and receive tax relief.
I will advise you 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 could justify a certain course that you did a few years ago. Also, the business focus may change in the future when you are contracting.
If you keep notes about the training, this will help if you receive a query concerning your claims from a few years ago.
The types of courses and what to consider
A University course / MBA
You might undertake a uni 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, you can show that these are not relevant to the services that your business offers. For that reason, you are unable to claim this as an 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.
HMRC’s specific guidelines here are:
Specific deductions: admin: own training courses
It is key that you incur the training cost wholly and exclusively for the trade. The training should be for a trade that you carry out at the time when you take on the training. Costs of training courses that you attend as the owner of a business (as either as a sole trader or in partnership with others) that 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. What’s more, 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 info 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.
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 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.