Reply to: Training, certification expense limits

[TheFaQQer]

If HMRC come knocking I simply direct them to my accountants etc who assessed the contract. They then resolve it as part of the service.

Which accountant do you use?

I'd be interested in an accountant that will take any tax investigation as far as possible to fight the case for me for the fees that one typically pays an accountant. As a rough guess, I'd expect expert IR35 defence to cost a minimum of £10k, so I'd seriously consider moving to an accountant that will fund that themselves.

TIA.

[pmasoft]

Why do your accountants assess your business contracts when you have a solicitor?

They are also tax accountants. I was pointing out that I have both camps covered

[SueEllen]

I don't I rely on my tax solicitor and accountant's opinion. I am not saying IPSE do not have their place but they are not the only show in town.





If HMRC come knocking I simply direct them to my accountants etc who assessed the contract. They then resolve it as part of the service.

What is a "full blown" architect: is that better than RIBA, or just overweight?

Why do your accountants assess your business contracts when you have a solicitor?

[pmasoft]

No perhaps not - but their advice is qualified and authoritative and, in this case, comes from an expert in tax law, so don't dismiss it too lightly. Certainly don't value it above your own opinion.

I don't I rely on my tax solicitor and accountant's opinion. I am not saying IPSE do not have their place but they are not the only show in town.

So ignoring the side benefits like protection against various loss-making events like non-payment and agency defaults, and access to a whole load of discounted services, when the brown envelope from HMRC for anything at all to do with taxation arrives, you're on your own and looking at a £15k bill to prove your innocence. I'm a full blown architect with 35 years in the trade and as far from IR35 as you're likely to get, but I see my membership as a necessary business protection.

Or are you still stuck in the mindset that IPSE is all about IR35 and nothing else?

If HMRC come knocking I simply direct them to my accountants etc who assessed the contract. They then resolve it as part of the service.

What is a "full blown" architect: is that better than RIBA, or just overweight?

[malvolio]

It is appropriate according to IPSE. However they are not infallible.

No perhaps not - but their advice is qualified and authoritative and, in this case, comes from an expert in tax law, so don't dismiss it too lightly. Certainly don't value it above your own opinion.

Why would I kid you about being a member of IPSE? I have been in business for over 30 years and more than capable of getting a contract assessed/modified without their help. Indeed IT contracts are quite straightforward compared to some I have to deal with in my other businesses.

So ignoring the side benefits like protection against various loss-making events like non-payment and agency defaults, and access to a whole load of discounted services, when the brown envelope from HMRC for anything at all to do with taxation arrives, you're on your own and looking at a £15k bill to prove your innocence. I'm a full blown architect with 35 years in the trade and as far from IR35 as you're likely to get, but I see my membership as a necessary business protection.

Or are you still stuck in the mindset that IPSE is all about IR35 and nothing else?

[pmasoft]

Feel free, but the above quote is the appropriate one, that applies to our companies. You need to distinguish between a personal gain and a corporate one. For a close company, where you are the only or one of very few shareholders, it is very difficult to separate the two. BigCo doesn't have that problem since it has multiple shareholders.

As for "However, I am not an IPSE member as I have no current need", you are kidding us, aren't you...

It is appropriate according to IPSE. However they are not infallible.

Why would I kid you about being a member of IPSE? I have been in business for over 30 years and more than capable of getting a contract assessed/modified without their help. Indeed IT contracts are quite straightforward compared to some I have to deal with in my other businesses.

[malvolio]

I used be a PCG member, in fact one of the first. However, I am not an IPSE member as I have no current need.

Here is the IPSE extract from your above link re: training :-

Where the purpose of training is to provide a business owner with new skills, the cost is treated as capital and is not deductible for income tax. If the purpose is to update existing skills, then the expense is allowable. Where the IR35 rules apply, training expenses may be included within the 5% allowance for general expenses but not claimed separately in their own right.

Note highlight:"Business owner" and "income tax" This appears to have been taken from the personal tax criteria and not corporation tax rules.

I will stick with the incorporated business rule as HMRC states on their website in 408(2015) as quoted in my previous thread entry.

Feel free, but the above quote is the appropriate one, that applies to our companies. You need to distinguish between a personal gain and a corporate one. For a close company, where you are the only or one of very few shareholders, it is very difficult to separate the two. BigCo doesn't have that problem since it has multiple shareholders.

As for "However, I am not an IPSE member as I have no current need", you are kidding us, aren't you...

[pmasoft]

Are you a member of IPSE? It might be worth asking on their forums which bit of HMRC guidance supports the following

https://www.ipse.co.uk/advice/tax-tr...iness-expenses

Where the purpose of training is to provide a business owner with new skills, the cost is treated as capital and is not deductible for income tax. If the purpose is to update existing skills, then the expense is allowable.


Most of the accountant websites say the same, so it would be good to understand from where they are getting that - any comments from the accountants?

I used be a PCG member, in fact one of the first. However, I am not an IPSE member as I have no current need.

Here is the IPSE extract from your above link re: training :-

Where the purpose of training is to provide a business owner with new skills, the cost is treated as capital and is not deductible for income tax. If the purpose is to update existing skills, then the expense is allowable. Where the IR35 rules apply, training expenses may be included within the 5% allowance for general expenses but not claimed separately in their own right.

Note highlight:"Business owner" and "income tax" This appears to have been taken from the personal tax criteria and not corporation tax rules.

I will stick with the incorporated business rule as HMRC states on their website in 408(2015) as quoted in my previous thread entry.

[mudskipper]

Are you a member of IPSE? It might be worth asking on their forums which bit of HMRC guidance supports the following

https://www.ipse.co.uk/advice/tax-tr...iness-expenses

Where the purpose of training is to provide a business owner with new skills, the cost is treated as capital and is not deductible for income tax. If the purpose is to update existing skills, then the expense is allowable.


Most of the accountant websites say the same, so it would be good to understand from where they are getting that - any comments from the accountants?

[pmasoft]

OK, this refers to self assessment, but is pretty explicit

https://online.hmrc.gov.uk/informati...=TotalExpenses


Training costs you can claim for:
You can claim for the cost of training, if the purpose of the training is to update business skills or expertise.

But you can't claim for costs if the training is for a business related new skill or qualification.


I guess it's down to your appetite for risk - the chances of a week's training course being questioned is pretty small.

As you say this is for SA and therefore personal tax. It does not apply to incorporated businesses whereby HMRC 408 spells it out in detail

[mudskipper]

OK, this refers to self assessment, but is pretty explicit

https://online.hmrc.gov.uk/informati...=TotalExpenses


Training costs you can claim for:
You can claim for the cost of training, if the purpose of the training is to update business skills or expertise.

But you can't claim for costs if the training is for a business related new skill or qualification.


I guess it's down to your appetite for risk - the chances of a week's training course being questioned is pretty small.

[pmasoft]

How about:

BIM47080 - Specific deductions - staffing costs: staff training & development

Where on the other hand an employee or director of a company, on whom the expenditure is incurred, has a significant proprietary stake in the business or is a relative of those who do, there is obviously a much greater chance that expenditure may have been incurred not, or not wholly, for business purposes but to provide the employee with some personal benefit. If that is the case then the expenditure is not deductible - the business purpose has to be the exclusive purpose.

However "personal benefit" does not mean knowledge gained. The example given in the document after your extract states:

If that is the case then the expenditure is not deductible - the business purpose has to be the exclusive purpose. To take an extreme example, there could be no allowance for the educational costs of the business proprietor's son who is employed in the business during university holidays.

Now that is a personal, i.e. financial, benefit of putting uni fees through the business.

[mudskipper]

How about:

BIM47080 - Specific deductions - staffing costs: staff training & development

Where on the other hand an employee or director of a company, on whom the expenditure is incurred, has a significant proprietary stake in the business or is a relative of those who do, there is obviously a much greater chance that expenditure may have been incurred not, or not wholly, for business purposes but to provide the employee with some personal benefit. If that is the case then the expenditure is not deductible - the business purpose has to be the exclusive purpose.

[pmasoft]

Extract from HMRC 480(2015)

OK I have had a search and found the following. Please note "reward" does not relate to knowledge gained and "new job" is not the same as "change of duties or extension thereof":

5.25
There is a wide statutory exemption for payments or reimbursements,
by employers or third parties, of expenditure on the provision of
work-related training.
However, any payment or reimbursement of training costs which has as
its purpose:
• an intention to reward the employee
• the provision to the employee of an employment inducement (for example,
to take up a new job)

Sections 270A,
318 and 318A
• enabling the employee to enjoy the facilities or benefits for entertainment
or recreational purposes unconnected with ‘work-related training’ will
remain taxable
The rules provide for the following:
• expenditure which is incurred for a mixed purpose (part-reward,
part-training) will need to be apportioned. Apportionment is not necessary
just because an element of genuine training is enjoyable or recreational. For
example, the incidental use of a hotel’s swimming pool and leisure facilities
during a residential course will not require apportionment
• exemption applies to both internal and external courses
• there is no territorial limitation on the location at which training
is undertaken
• exemption extends to a range of training materials including audio/video
tapes and compact/floppy disks
• exemption applies not only to the cost of providing qualifying training, but
also extends to related costs, such as the cost of additional childcare and
the travelling and subsistence costs of the trainee
• the definition of work-related training includes training which is linked to
charitable and voluntary activities
• the exemption from tax is mirrored by a NIC exemption
• incidental overnight expenses can be paid tax-free to employees on training
courses in the same way as such expenses can be paid tax-free when an
employee is away on business
• generally, the exemption does not extend to the cost of providing the
employee with, or with the use of, any asset once the training has ended -
exceptions are dealt with in Appendix 9
More information and guidance about the exemption for work-related
training is given in Appendix 9.

Extract from Appendix 9

Work-related training
Work-related training is training for an employee’s current employment or a
‘related employment’.
�
It is defined as any training course or other activity which is designed to
impart, instil, improve or reinforce any knowledge, skills, or personal
qualities which:
�
• are, or are likely to prove, useful to the employee when performing his or
her duties, or
• will qualify or better qualify the employee to undertake the employment, or (My highlight)
to participate in charitable or voluntary activities arising through
the employment
The term includes a wide range of practical and theoretical skills, so long
as those skills are relevant to the employee. Where leadership team skills
are appropriate to the employee, participation in activities such as Outward
Bound, Raleigh International, or Prince’s Trust will qualify. The cost of an
employee’s participation in a genuine Employee Development Scheme, which
seeks to improve the employee’s attitude towards training by commencing
with an enjoyable course as an introduction to more concentrated job-related
training, will also qualify.

[TykeMerc]

It's actually perfectly simple: "Wholly and Exclusively" remains the baseline. If you aren't already earning money doing it, you fail that test since you personally gain from the additional skills or qualifications.

BigCo gets away with it because they can argue that they need the skills in house so will train the most suitable candidates. However, if those people leave shortly afterwards they will almost certainly be billed for the training costs, for exactly the same reason.

That argument looks simple, but it's a bit more complicated in the real world.

Like most of us I don't work entirely at one type of task and I never have.
I became a full time PM after a couple of years of combining infrastructure engineering with bits of PM and service management and these days I do Programme Management, Business Consultation and Architecture, the way you put it in black and white terms what line could I actually train in? I've spent the last 10 months working on an SAP rollout programme, could I train in SAP techie fields?

In reality many contractors could argue they earn money in multiple fields so they could defend an argument they're simply improving on skills they have to an extent.