The majority of contractors will invest in training at some point in order to keep their skills up to date and attractive to potential clients. For some this will also be a requirement of a professional membership, as part of their continued professional development (CPD). As courses can be expensive it’s preferable to pay for these through your company rather than from your personal income. HMRC recognises that training can be necessary within a business, so these costs can be claimed as tax deductable business expenses through your Limited Company.
However, it’s important to be clear on what type of training is being taken and for what purpose as not all training costs qualify as a legitimate business expense under HMRC rules.
What types of training qualify?
HMRC specifies that to qualify as a legitimate business expense the training must be ‘wholly necessarily and exclusively’ for the purposes of existing trade. This means that the training taken must be in a skill or subject which directly applies to work currently generating income for the contractor. If the training taken clearly complies with this definition then no significant benefit in kind will be assumed.
What if I’m training to enhance my skills?
A key point is that training taken to gain new skills for the future, but not directly relating to current fee earning work, is not allowable and will have to be paid for at the contractor’s own personal expense.
Training which falls into this category will be deemed either as a benefit in kind for the contractor personally or capital expenditure for the future benefit of the business.
For Limited Companies, HMRC will not allow the cost of gaining new or un-related skills as a legitimate business expense. However, once you have taken the training and start earning income using those new skills further training in these new areas will be allowable.
Should I let a client pay for my training?
There are several reasons why this would not be advisable, the main one being that employers usually pay for training for their employees, so you could potentially run into issues with HMRC under IR35. If the client really wants you to do the training the best option would be to pay for it yourself.
If you are un-clear whether any training you have taken or are planning to take would be allowable, contact your contractor accountant for guidance.
This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.