Training and tax position

[tractor]

Hi,

I am currently contracting via a ltd company. My work is mainly software architecture and development, but I would like to retrain to bring myself back up to speed on some skills that I used to have (specifically Oracle database performance - which I did for 12 years, but have lapsed in the last 5 years).

My accountant tells me that I cannot pay for this training via the ltd as its not directly in support of the current main business focus, implying that I would need to first get a contract which involves some degree of Oracle performance work. Is this correct? Seems like a catch-22 situation.

Cheers,
Karl.

My emphasis so that we don't lose the OP's quandary in the noise.

Perhaps it 's just a lack of clarity, but I've been told by several accountants over the years that for personal training to be a non-BIK it has to be directly related to your fee-earning work. I sell Service Management expertise mostly, which is a fairly broad area, but I can't claim for training in cost accountancy or ice-cream making if I fancy a change of direction. Clearly someone in coding or web design can claim for learning a new language or middleware framework but not for conversion into a PM, for example. You also can't claim for learning sales, cost accountancy and presentation technique on the grounds of having a company to support; you don't actually earn money from those activities directly (although obviously they are good things to know about).

As always we're arguing about edge cases.

I don't think it is lack of clarity, I agree with Contreras, it's just another contractor myth possibly started by lazy accountants who know HMRC will fight it and they want an easy life so they just say 'not allowed here' and expect you to just back off.

Your first para gets it exactly. That is what the whole OP was about, refresher training for an old skill that is becoming useful again. I don't see that as an edge case and I am putting forward the view that in the advice I have seen and how I read the regs, the specific training the OP is talking about would likely be allowable. Clearly, if the OP's accountant refuses to allow it in the accounts, the options are to bring the accountant onside or to change accountants.

[tractor]

...

Sorry I think that HMRC's perspective is that they won't like anything they perceive to be a 'sham' arrangement - anything can be written in a contract but if doesn't reflect the reality of a situation they're not going to go for it.

Yep, we are in agreement there

This is why I made the point that HMRC would likely look at the reality of the contract between the director and the company (where have we heard this before) and say if you are paid min wage, it is a sham. If you are paid a salary commensurate with an 'employed' specialist at market rate, then it is less likely to be a sham. In which case, if that salary puts you in a higher tax bracket, then you are between a rock and a hard place and a commercial decision then has to be made; claim VAT plus 20% of the training costs to corporation tax or stump up the extra in personal tax/NI. That is the trade off.

Seems sensible to me and it also prevents some of the sharper practices we often hear about (of course not from some of our esteemed posters, they are all legit and wouldn't claim the cost of a postage stamp if it saved them a quid )

[malvolio]

My emphasis so that we don't lose the OP's quandary in the noise.
....

Well yes, but I can also understand his accountant's viewpoint; Oracle performance management is not a necessary element of architecture or development (although awareness is arguably useful, it is not a prerequisite) .

However the accountant is there to advise and to be cautious. If the OP feels the cost is justifiable. that's his decision, not his accountant's. In this specific case, I would probably be tempted to allow the claim for in not being a BIK, but only the OP can do the sums to work out the risk/reward ratio. If it's a few hundred in taxes to gain a significantly better earning capacity, it may be worth it.

[LisaContractorUmbrella]

Yep, we are in agreement there

This is why I made the point that HMRC would likely look at the reality of the contract between the director and the company (where have we heard this before) and say if you are paid min wage, it is a sham. If you are paid a salary commensurate with an 'employed' specialist at market rate, then it is less likely to be a sham. In which case, if that salary puts you in a higher tax bracket, then you are between a rock and a hard place and a commercial decision then has to be made; claim VAT plus 20% of the training costs to corporation tax or stump up the extra in personal tax/NI. That is the trade off.

Seems sensible to me and it also prevents some of the sharper practices we often hear about (of course not from some of our esteemed posters, they are all legit and wouldn't claim the cost of a postage stamp if it saved them a quid )

So basically we're in agreement then so I'll just

[tractor]

...

Well yes, but I can also understand his accountant's viewpoint; Oracle performance management is not a necessary element of architecture or development (although awareness is arguably useful, it is not a prerequisite) .

However the accountant is there to advise and to be cautious. If the OP feels the cost is justifiable. that's his decision, not his accountant's. In this specific case, I would probably be tempted to allow the claim for in not being a BIK, but only the OP can do the sums to work out the risk/reward ratio. If it's a few hundred in taxes to gain a significantly better earning capacity, it may be worth it.

It is a skill the OP used until recently (5 yrs) that has become stale and needs refreshing. It has nothing to do with the skill(s) they are using to earn right now. Stop confusing it by making it seem relevant. It is not. There does not need to be a relationship between the two at all.

Of course it's the OP's call. If the OP takes a salary commensurate with market rate for those skills and their personal tax position makes it viable then I would suggest it's commercially sensible for the company to claim it. Otherwise not, it's a simple decision really.

[tractor]

...

So basically we're in agreement then so I'll just

No, please.....don't jump, we need more agreement in this world and esp here lol

[malvolio]

It is a skill the OP used until recently (5 yrs) that has become stale and needs refreshing. It has nothing to do with the skill(s) they are using to earn right now. Stop confusing it by making it seem relevant. It is not. There does not need to be a relationship between the two at all.

Of course it's the OP's call. If the OP takes a salary commensurate with market rate for those skills and their personal tax position makes it viable then I would suggest it's commercially sensible for the company to claim it. Otherwise not, it's a simple decision really.

5 years in technical IT is not "recent". And the BIK argument is actually predicated on what they do to earn money, sadly.

It is certainly not clear cut. However it is sufficiently marginal that I would risk it.

[LisaContractorUmbrella]

No, please.....don't jump, we need more agreement in this world and esp here lol

[TheCyclingProgrammer]

So if your business is IT, you could argue that pretty much any IT course is claimable. It it came to an investigation then with a good amount of arguing you would probably just have to pay the tax avoided if the expense was eventually disallowed.

I think the rule is to prevent people expensing something completely off the wall like an IT consultant doing a photography course or something.

This is my view on this too. I also think the intention is to prevent somebody for learning a new skill totally unrelated to their line of business. So if yiur a software developer and are learning a new technology or language I don't think this is necessarily outside the scope of your business activity.

It's quite subjective because it depends on how broadly you want to define your "business activity".