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Are training costs tax deductible?

Are training costs tax deductible?
Wednesday, 10 November 2010 15:08

Any cost associated with the improvement of skills that are used in your business or employment are potentially tax deductible - but this isn't always the case!

Employees

It is much more difficult for employees to justify a claim for training costs that they meet personally and claim for on their tax return. HMRC would look hard at the circumstances. Claimants will need to prove that the training costs were incurred wholly and exclusively in the performance of the duties of the employment. In other words that there is no personal value to the employee and the particular job cannot be performed without incurring the expenditure. In practice this is almost impossible to prove.

Employers

The position of the employer is much clearer. Any expenditure on work-related training should be allowed for tax purposes.

Salary sacrifice solution

A solution may be a salary sacrifice by the employee in favour of the provision by the employer of work related training. The exchange of salary for training creates no benefit in kind complications and as the exemption applies for tax and NIC purposes, both parties should enjoy NIC savings.

Self employed


Self-employed traders will need to satisfy the rules for deduction of costs, namely, that they are incurred wholly and exclusively for the purposes of the trade or profession. This is an easier test to satisfy than that required for employees although there can be issues if brand new skills or qualifications are involved.

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