As a UK contractor or business owner, when is training a business expense and can I claim tax relief on training courses? In addition, as a UK limited company contractor, when can you write off training as a business expense for your company? This is an important question for UK contractors and business owners. This is because they will incur business training costs when they take courses as and when the need arises. Therefore, in this article we will look at while you are UK contracting, when are training costs tax-deductible. This will include taking a look at are online courses tax deductible as well as other training courses where you will attend an actual course.
Initial considerations -tax relief on training courses
Improve your skills
While contracting through your own 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 need to brush up on your skills from time to time. Improving an existing talent or skills will assist with your personal development. Notably, this may give you a crucial edge when you apply for new contracts. As a result, this may involve taking part in some business training courses and exams in connection with this. In addition, training in business will include such courses and exams. Indeed, these will form part of your overall business training costs.
Therefore, how do I claim professional training expenses on taxes? Most importantly, if you know what types of training you can claim as business expenses this is good when you run your own company.
When is training a business expense?
When we consider undertaking training courses, we should first look at when is training tax-deductible. First of all, most employers will train employees from time to time and incur employee training costs. In addition, 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. 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 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.
Benefit your business
As a business owner, when you undertake the training, it 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. The improved skills you attain should also assist you in performing better. This is all to the advantage of your business and its future.
Claim training expenses as a UK contractor or small business owner
If you run your own company, there is some flexibility here. When considering can you deduct training as a business expense and can you claim professional training expenses on taxes, 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. This will include management and leadership skills.
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.
Tax relief on training courses -the types of training costs
If we look at when is training a business expense and at what point are training costs tax-deductible, the types of business training courses and training programs that you may claim for as a UK 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 from the list above or one not listed here, such as a professional IT training for business. When you have chosen your business professional training 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 business courses to brush up on their skills.
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.
Besides receiving tax relief on training courses, 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
When we investigate can you claim professional training expenses on taxes, 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. As a result, you can 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.
Tax relief on training courses -keeping records
It is advisable to take note of 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. This could be 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.
Tax relief on training courses -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? Therefore, are professional development courses tax-deductible? In HMRC’s words with regards to 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 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 the costs of business training courses however only when the training is `wholly and exclusively’ for business purposes. If it could be proved that the training was not for your business activities, it would be treated as a Benefit in Kind.
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.
It is important to remember 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  EWHC2491 (Ch), and BIM35660.
We have considered here at what point is training a business expense and when are training costs tax-deductible. Indeed, it is important to note the above guidelines when you consider what you can claim. Business training costs to update your skills and knowledge are essential in any industry. Indeed, as a UK contractor, you may take on business training courses 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 income in the future.
Finally, 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