Training expenses inside IR35

[benboy]

I am a new contractor and I am starting a contract in 2 weeks which will fall inside IR35.

Before I start the contract, I am planning to gain a professional certificate costing £1600 which will help me perform my job at this contract as well as help me get new contracts.

Is there any way to claim this training cost as a legitimate business expense using either an umbrella or limited company?

[Mordac]

Get Bauer & Cottrell to check out your contract. They will tell you if it's inside IR35 or not, and may be able to negotiate clause changes with your agency.
If you're inside, training isn't claimable (except, as the lizard says, out of your 5%).

[benboy]

I am a noob, so please excuse my ignorance...

So, if I can't claim this as a business expense, do I have to pay for it myself from net earnings?

If this is the case, do I also have to pay VAT as I am paying for it and not the company?

[Mordac]

You can't claim it as a business expense under IR35, so effectively yes, you are paying out of net earnings.
I believe you can still reclaim the VAT (if you are registered). You certainly have to pay VAT, regardless of whether you are purchasing as an individual or a business.

[expat]

do I have to pay for it myself from net earnings?

Yes. As the govt minister said, "If training is needed for the job, then the employer should provide it".

Or as we might say, if training is needed for the contract, then the client should provide it. Hmm. Not quite so self-evident.

Aha! It's your fault for having the wrong status. Again, "if you have the right status then the right benefits will flow from it". All is now clear. You should be an employee.

[expat]

"It's only Fair"...

Repeat this mantra...

Well, that is actually Primarolo's case for not allowing IR35-caught Cos to claim tax relief on training:

Hansard 3 July 2002

I shall remind hon. Members how training is treated under the tax system. The employer receives the tax relief to pay for the training of their employees. The new clause would allow the service company, as the employer, to gain access to the tax relief and then give it 5 per cent. on top for no earthly reason whatever. It would allow the company to claim the employee's tax relief and the employer's tax relief for the same person. That is simply not fair. It is not fair on the other taxpayers, and there is no justification for special treatment in that way.

I notice in passing that the Paymaster General seemed to labour under the misapprehension that one can claim "5 per cent. on top for no earthly reason whatever". Perhaps Malvolio could put HMG right on that one? Or perhaps it is right and we can all go claiming "5 per cent. on top for no earthly reason whatever". Me first!

[benboy]

If I am in deemed employment then the company "employing" me should be responsible for my training? I don't see that happening as the contract is not long enough for them to justfy the training expense.

If I add a clause to my contract stipulating that the "employer" is not responsible for my training, can this be used as an argument for being outside of IR35 (on the grounds that I am not being treated as an employee)?

[malvolio]

HMG in general, and Dim Prawn in particular, are well aware of the anomaly about training and IR35. The argument put to them was that the "employer" is YourCo, so why shouldn't it be a legitimate business expense - you wouldn't want it if it weren't something to do with your work, after all. The fact that they have ignored the problem (yet continue to shout about having a highly-skilled, mobile workforce) speaks volumes.

Their counter argument is that if you are inside IR35, you are a deemed employee and any required training should be provided by your deemed employer. They neatly ignore the detail that no client is going to pay to train contractors other than in very rare circumstances, and are certainly not going to take on someone who hasn't got the required knowledge - which they will have acquired by osmosis over the internet, perhaps...

[expat]

HMG in general, and Dim Prawn in particular, are well aware of the anomaly about training and IR35. ...

I was taken, not so much by the anomaly regarding training, which has been long discussed already, but by the idea, new to me at any rate, that the Paymaster General herself expected us to claim "5 per cent. on top for no earthly reason whatever", which is something we wrist-slap newbies for imagining that they can do.

[hugebrain]

training?

and are certainly not going to take on someone who hasn't got the required knowledge - which they will have acquired by osmosis over the internet, perhaps...

What's osmosis? I always use google to turn me into an instant expert in anything required. I thought all contractors did.