Reply to: Expense for accountancy training allowable?

[Maslins]

I'm merely relaying the HMRC rules that some seem incapable of tracking down for themselves. Perhaps learning how to navigate HMRC's website should be an allowable expense...

HMRC's guidance is typically pretty rubbish, in fairness to them it's mainly because there's been so many tax laws introduced over the years that many contradict each other.

See BIM42526.

"Provided it is incurred wholly and exclusively for the purposes of the trade carried on by the individual at the time the training is undertaken, expenditure on training courses attended by the proprietor of a business (either as a sole trader, or in partnership with others) with the purpose of up-dating their skills and professional expertise is normally revenue expenditure, which is deductible from profits of the business."

Also:

"In considering the question of purpose, you should not take an unduly narrow view of whether the content of any particular course only up-dates existing skills of the individual. But if it is clear that, for example, a completely new specialisation or qualification will be acquired as a result of the expenditure, it is unlikely that the expenditure will be wholly and exclusively for the purposes of the existing trade."

So in my view, as mentioned previously, doing a general "how to understand accounts/tax" type course is definitely allowable, as would a sales or marketing course. These are basic skills that anyone running a business uses to some degree.

But to the guy who's studying his AAT so he can do bookkeeping on the side, I think if anything you're shooting yourself in the foot rather than making your case more convincing.

Like I said, it's down to motive. Your motive is to use it to make money in a new business. It is therefore not a deductible expense of your current business, instead I suppose it could be argued it's a pre-trading expense of your new business.

[malvolio]

So for an equipment manufacturer, for example, you are saying that manufacturer would not be able to write off the training for its non-core functions, IT, HR, Accounting, Sales, Marketing, because these are administrative and not bringing money into the company ?

I don't think so.

No, I didn't say that. Read it properly. You are not a manufacturer with several threads to your income stream and mulitple staff to keep up to speed, you are a one-man company with but a single marketable skill.

Anyway, don't shout at me. I'm merely relaying the HMRC rules that some seem incapable of tracking down for themselves. Perhaps learning how to navigate HMRC's website should be an allowable expense...

[FarmerPalmer]

Having the argument is not the problem. Losing it is the problem. (As is spending company money to replicate something you're already paying someone to do, but that's your decision of course.)

However, getting better at adminstrating YourCo is not bringing fees into YourCo . That is the test that HMRC will apply.

So for an equipment manufacturer, for example, you are saying that manufacturer would not be able to write off the training for its non-core functions, IT, HR, Accounting, Sales, Marketing, because these are administrative and not bringing money into the company ?

I don't think so.

[moorfield]

However, getting better at adminstrating YourCo is not bringing fees into YourCo . That is the test that HMRC will apply.

In my case it is, beacuse I'm putting some part-time book keeping work through ltdco too (anticipating that test). Admittedly its peanuts compared to my "day job" but it's above board and I guess helps muddy the waters a little.

[malvolio]

Having the argument is not the problem. Losing it is the problem. (As is spending company money to replicate something you're already paying someone to do, but that's your decision of course.)

However, getting better at adminstrating YourCo is not bringing fees into YourCo . That is the test that HMRC will apply.

[moorfield]

I know that any training type expenses that you want to put through your Ltd must be directly related to the type of work that you are doing. However, I'm thinking of doing a basic accountancy course to aid me with the running of my company. Cost is around £300. Since this is related to the company, is it an allowable expense?

TIA.

I am doing precisely this also - the AAT courses - and paying for exam fees and text books through ltdco. I see it as my directors duty to keep proper records etc. and to be able to understand and validate what the accountants are doing with my year end accounts before I sign them off - learnt that the hard way having had some almighty cock ups in previous years. So the training is an essential part of this for me (and of course it gives me other skills for the longer term). If Hector ever comes knocking I'll be quite happy to argue the toss.

[northernladuk]

Then again, given the number of people that come on here and ask about how to run a company after the event...

LOL!!!

[malvolio]

May be so. Snag is, Hector doesn't seem to agree...

Of course, you could argue that you should have all the relevant skills and knowledge before you set up a commercial enterprise. That would include your own stock-in-trade as well as a basic understanding of bookkeeping, assorted Finance Acts, the Companies Act, the Factories Act and all the usual HSE guff. So where would you draw the line?

Then again, given the number of people that come on here and ask about how to run a company after the event...

[northernladuk]

Interesting

[SorenLorensen]

Great stuff. Very interesting link Malvolio, thanks for that.

[blacjac]

Hmm, that's very interesting link. It does rather seem to imply that you are correct, it would also imply that as an IT contractor any sales or marketing training would also be disallowed as this is not to do with your trade.

This however goes against the advise I have been given by my accountant (re sales and marketing), would any of the resident accountants / tax specialists care to comment?

[malvolio]

If you can argue that dedicated training in basic accountancy (as opposed to general reading or outsourcing) is directly related to income generation within the company, then you may have a point.

I'm not sure Hector would agree, though, since the rules of allowable training costs are all framed in terms of being related directly to income generation.

“In considering the question of purpose, you should not take an unduly narrow view of whether the content of any particular course only up-dates existing skills of the individual. But if it is clear that, for example, a completely new specialisation or qualification will be acquired as a result of the expenditure, it is unlikely that the expenditure will be wholly and exclusively for the purposes of the existing trade.”

I suggest that the OP's question fails under that distinction

The detail is here - http://www.hmrc.gov.uk/manuals/bimmanual/BIM42526.htm

[Maslins]

I think it simply depends upon your motives.

I don't think many people would study accountancy for pleasure, so if you, as director of your own company doing whatever (non accountancy) want to be able to better understand your accounts, then it most likely is wholly and exclusively for the benefit of your business.

If, on the other hand, you're getting fed up of what you currently do, and are considering moving into a career in accountancy, then these courses will not be deductible expenses for your current business.

The ITEPA references are more in relation to employees, where the rules are much more strict.

[SorenLorensen]

Thanks for the replies so far guys. I also don't think it's quite as clear cut a "no" as malvolio says. Reading the links from Moscow Mule (cheers btw)...

For the purpose of the exemption in Section 250 ITEPA 2003 (see EIM01210), "work- related training" 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/her duties or
* will qualify or better qualify the employee to undertake the employment, or to participate in charitable or voluntary activities arising through the employment.

The training must relate to the employee’s current employment or to a "related employment" (see EIM01230).

The difference here for me is the wording, "work-related" rather than "duties under your existing contract" from SJD. I'd have thought that my role as a director, accountancy (and marketing as mentioned) is directly related to my work, albeit it is not what I charge for.

Thoughts?

[blacjac]

Sorry Mal, but I think you are wrong.

I agree with what you have quoted, however as the director of a small company, accounting is very much part of your duties, just like marketing and sales.

Your company would be at a very substantial disadvantage and would probably fail if none of these functions were performed, and any of them can be outsourced (to an accounant, or agent for example), however they do need to be performed in order to keep the company running.

If I deceide to savem my company around 1k per year by spending a few hundred one off on a training course, then this is perfectly allowable.