Can I claim training costs through my business?
A question we are frequently asked is can I claim the cost of attending a training course through my business? The answer differs depending on whether you are trading as a sole trader or as a limited company.
Limited company
If you trade as a limited company
Work-related training is any activity that will be useful to the employee performing their duties. The training must relate to the employee’s current employment or a related employment (one which they are expecting to hold).
Some examples of qualifying courses are:
Leadership and team skills (e.g. Prince’s Trust)
Work related first aid courses
Self-tuition packages, computer based training, distance learning, work experience or work placement and informal teach-ins.
Expenditure must be “wholly and exclusively” for the purposes of the business in question.
One area where you need to pay attention is if you are providing training to an employee or director who has a significant stake in the business or a relative of those who do. In this case, there is a greater chance that the expenditure may not have been incurred wholly for business purposes but to provide some personal benefit.
Example:
You would not be able to claim the tuition fees of the business director’s son who is employed during their summer holiday.
The best question to ask is whether you would still have spent money on training this person (or yourself) if they were an unconnected employee doing the same job? Does it make business sense to do so?
Guidance:
www.gov.uk/hmrc-internal-manuals/business-income-manual/bim47080
Sole trade
If you trade as a sole trader
There are two key criteria here which need to be met before the training course cost is deductible for tax purposes:
The training course must be “wholly and exclusively” for the purposes of trade; and
The course must be for updating existing skills or knowledge rather than acquiring a new skill
Example:
In the case Dass v Special Commissioner, the taxpayer was an English tutor and also an advisor who brought appeals before tribunals. He took a course leading to a diploma in Law but the fees were determined to be acquiring a new skill rather than a “refresher” of his existing expertise and therefore not tax deductible.
Guidance:
Specific guidance: www.gov.uk/hmrc-internal-manuals/business-income-manual/bim42526
More guidance on establishing whether something is wholly and exclusively can be found here: www.gov.uk/hmrc-internal-manuals/business-income-manual/bim37050