Tax relief may be claimed for training costs incurred to keep pace with advances in technology and practice in the person’s trade.

HMRC has updated its guidance to provide greater clarity on the tax treatment of training costs incurred by the self-employed.  

The self-employed may deduct training costs in calculating their trading profit or loss where the following two conditions are satisfied:  

  1. the expenditure is incurred wholly and exclusively for the purposes of the person’s trade; and   
  2. the expenditure is not capital expenditure (ie, it is revenue expenditure). The second test in particular can be difficult to apply in practice. 

HMRC states that training costs are revenue expenditure where the intention is to update current or provide new skills or knowledge in the person’s existing trade.  

This will usually include training to keep up with advances in technology and changes in practice in the person’s business area. Depending on the circumstances, it may include  training ancillary to the person’s trade (eg, a course on bookkeeping).  

However, a deduction may not be claimed for training that allows the person to start a new business or expand into a new, unrelated area of business. HMRC believes that this is capital expenditure.  

Examples are provided of circumstances in which training costs may and may not be deducted.  

HMRC consulted on options to reform the rules for tax relief for training costs in 2018.  


Further reading: 

ICAEW’s Tax Faculty is recognised internationally as a leading authority and source of expertise on taxation. The faculty is the voice of tax for ICAEW, responsible for all submissions to the tax authorities. Join the Faculty for expert guidance and support enabling you to provide the best advice on tax to your clients or business.


Source link

Leave a Reply

Your email address will not be published. Required fields are marked *