Tax Relief on Self-Funded Training


After yesterday's Spring Statement 2018, the government published a three month consultation on introducing a tax relief for training costs incurred by employees and the self employed.

Training costs are already part of the allowable expenses for the self employed as long as the costs are wholly and exclusively related to the job at hand. Importantly, if the training introduces new skills not related to the work then the cost of training is disallowed. Similarly, for employee expenses, as long as the training expense is reimbursed by the employer then it is allowed to be offset against tax.

Sometimes an employer can fund an employee's re-training costs as part of leaving work and those costs are allowed.

However, if the employee pays out of pocket for training and is not reimbursed then no tax relief can be claimed.

The government became aware of this hole in current legislation and talked about extended reliefs back in the Autumn 2017 Budget. The consultation has now launched and sets out how to help out the near 900,000 employees and 500,000 self employed people who are currently paying for work-related training out of pocket. Our calculator for expenses shows how much of a difference it can make to take home pay when tax reliefs can be applied. In 2016, nearly 600,000 of those at the poorest end of the scale, unemployed people and students, paid for work-related training themselves.

When this consultation is over in June, the government hopes to have an idea on how to implement a system where people who are paying for training that is related to work but may not apply to their current work can receive tax relief on the costs.

The main hurdles to overcome are the fears of misuse or abuse by people, finding the money to pay for the tax relief, systems to administer and validate claims and identifying caveats to apply.

Training costs that would be able to benefit from a future tax relief include learning activities that impart, instill, improve or reinforce knowledge and skills.

Work-related training would be training, as above that includes courses and CPD (Continuous Professional Development).

An example of how tax relief could help an employee is a salesperson working for a company that trades with France. The salesperson wants to learn French in order to give them an advantage in their role. Tax relief would not currently be allowed on the course fees.

A self employed person taking on a course that provides them with new skills not already possessed would not be allowable for tax relief under current rules.

There have been similar tax reliefs in the past. Vocational training tax relief was for people who went on courses that resulted in a vocational qualification, or courses that didn't lead to a vocational qualification but were relevant to the employment/self-employment. The rules for this relief in the 1990's were that for qualification giving courses the person had to be over 16 years old and not in full-time education at school/college. For non-qualification giving courses the person would have to be at least 30 years old and the course a full-time study of at least 4 weeks in length.

Problems in the past were fraudulent claims with criticism levied that 'hobbies' were being subsidised by the taxpayer.

The results of the consultation will be discussed in the 2018 Autumn Budget around late November.

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