I was following a discussion over the weekend about someone asking if it was OK to expense accountancy training as part of his role as a company owner. My understanding of any expenses, including training costs, is that the expense must be wholly and exclusively in the line of your work. So clearly you can’t re-train as a driving instructor if you are working as a CAD/CAM designer: well actually you can, of course, it’s just that it’s not a tax-deductible expense.
However some other responses made me think. Clearly someone running a company needs at least a basic working knowledge of accountancy, so why would this not be an allowable expense? Time to visit the horror that is the HMRC website…
So an hour later (at least, it felt like an hour) I found the link. Or the beginning of the usual daisy chain of inter-related links.
http://www.hmrc.gov.uk/manuals/bimmanual/BIM42526.htm
What is says, in effect, that training is allowable if it is directly related to fee earning. If you gain an entirely different skill, like accountancy, then it isn’t. Which is pretty much as I thought, thankfully.
Of course, YourCo can pay you for what ever it wants. The only question is whether or not that payment is classed as a Benefit in Kind. A 22″ flat screen for your PC is fine, but not a 50″ plasma unless you are hoping to hold seminars in your living room and never watch TV. Why people find that so hard to understand is really beyond me.
Quick update on the job front from last week. Six applications sent (all for things I can actually do). Zero responses. I think I need to look at the CV again…
How is this for a different line of thinking though. You are also the Director of the company. You draw an income as part of your dividend. To run the company as a sole director you need certain business skills, one of these being accountancy. Without this you cannot do your books and receive the money you earn as dividends.
Surely that then means your directly earning and this expense is directly related to that?
But you could argue that you should have those skills before you set up the company. Or you employ someone who has them, like an accountant, to help out.
Anyway, it’s not directly related to fee earning, is it? The accountancy stuff is how you get the fees out of the company, not putting them in, which is the distinction HMRC are making.
Malvolio
The HMRC link you refer to relates to training expenses for the self employed sole trader or partner. Training expenses are pretty much always deductible for limited companies.
As you say the test is just “Is the expense wholly or necessarily for the purpose of the business?” In most cases it will be as it improves the skill set of the key asset – one of it’s employees enabling the company to earn more revenue.
” Provided it is incurred wholly and exclusively for the purposes of the trade carried on by the individual at the time the training is undertaken, expenditure (either as a sole trader, or in partnership with others) on training courses attended by the proprietor of a business “
This link from another part of the HMRC manual confirms it is deductible
http://www.hmrc.gov.uk/manuals/bimmanual/BIM47080.htm
The next question becomes whether the training expense is assessable on the employee/ director?!
If the training is not related to your work for the company there is a potential benefit in kind tax and NIC charge for the employee again as HMRC explains at this link.
http://www.hmrc.gov.uk/paye/exb/a-z/t/training.htm#2
Andrew Chartered Tax Adviser
Andrew
Thanks for the detailed reply. I invariably get lost on the HMRC’s website (who doesn’t) so apologies for quoting the wrong reference.
However, I think we agree that there is good chance that training costs in subjects not your own may well result in a BIK.