Reply to: MA course fees - payable out of company? tax position?

[oldtimer45]

Oh well never mind

Thanks for all the replies people - it's a no then!

[rmmc]

Well done rmmc. Agreed

I am glad that we agreed, otherwise OP would have thought we are mad discussing legislations

[Craig@Clarity]

Well done rmmc. Agreed

[rmmc]

This is in benefit of the op and any other user who may read this thread may think what they (Craig and I) were talking about.

As your daughter is not an employee so the fees paid is not allowable expense for the tax purpose. In order to get a tax relief, the business needs to satisfy the condition of “wholly & exclusively”. As she is not an employee this expense would fail the test.

You may sponsor her study or pay her scholarship again in order to get tax relief you need to satisfy the expense being “wholly & exclusively”.

Have a read on the following pages on sponsorship.

http://www.hmrc.gov.uk/manuals/bimmanual/BIM42565.htm

Which states
“…The type of evidence that may show a demonstrable lack of commerciality includes:
• sponsoring a relative or close friend,…” so sponsorship may not be a qualifying expense

A donation to the college or university may not work. The close company have to satisfy the following condition in order for qualifying donation (i.e. tax deductible)
-the payment is not made subject o any conditions as to repayment;
-neither the company nor any connected person receives a benefits in excess as the limits set in consequence of making the payment and
-the payment is not conditional on, or associated with, or part of an arrangement involving the acquisition of property by the charity (otherwise than by way of gift) from the company or connected person.

The maximum benefit that close companies or connected persons may receive is £250. (There are different rates based on donation but the cap it £250).

Coming back to last issue of “Necessary”. The business do not need to satisfy “necessary or necessarily” condition to be a qualifying expense.

However, “Necessary or necessarily” have to be satisfied by the employees when they claims an expense they incurred in course of performing thier duties and wish to claim against their income. That is S336 of Income Tax (Earning and Pensions) Act 2003.

There you go Craig, why I said it is not in legislation (ITA, ICTA or CTA).

[rmmc]

Apologies all. I should have said "necessarily" as in the legislation written in ITEPA03 section 336 found here http://www.legislation.gov.uk/ukpga/2003/1/section/336 and in the guidance from HMRC found here Wholly & exclusively: statutory background: expenses rule for employees

Before I get told off again.....on the link Wholly & exclusively: statutory background: expenses rule for employees it does state office holder which is a director or company secretary.

Are you sure that ITEPA-2003 applies to the limited company? Particularly Section 336?

[Craig@Clarity]

Because the law does not contain the word "Necessary".

Apologies all. I should have said "necessarily" as in the legislation written in ITEPA03 section 336 found here http://www.legislation.gov.uk/ukpga/2003/1/section/336 and in the guidance from HMRC found here Wholly & exclusively: statutory background: expenses rule for employees

Before I get told off again.....on the link Wholly & exclusively: statutory background: expenses rule for employees it does state office holder which is a director or company secretary.

[rmmc]

Why not?

Because the law does not contain the word "Necessary".

[TykeMerc]

How do companies who give bursaries handle this issue? I know typically the recipients are employees in some fashion, but that's not always the case.

If there's a straight and proper way to do this then I'd be tempted to exploit it myself as I've one undergraduate child at the moment and 2 others who will be before too long.

[Craig@Clarity]

Does not have to be necessary. Just "Wholly and exclusively" for the business purpose of the business.

Why not?

[rmmc]

The questions to be asked is whether the course fees are wholly, exclusively and necessary for the purpose of the business?

Does not have to be necessary. Just "Wholly and exclusively" for the business purpose of the business.

[Clare@InTouch]

There are specific rules for what counts as qualifying expenditure on sponsorship and donations here:

HM Revenue & Customs: Sponsoring a charity

[SueEllen]

Mmmm.

I've sponsored one of my nieces the last few years at Uni. I've done it as a payment through the LTD company for £1000 per year.

Not sure what the accountant did with it, but I just put it as sponsorship.

Don't know if that helps though.

Could you find out why this is an allowable expense MF please?

Cheers.

[MarillionFan]

Mmmm.

I've sponsored one of my nieces the last few years at Uni. I've done it as a payment through the LTD company for £1000 per year.

Not sure what the accountant did with it, but I just put it as sponsorship.

Don't know if that helps though.

[northernladuk]

It's easy. Withdraw the money legitimately from you co via PAYE or dividends, pay what you owe, give it to her. Jobs done. No fear of getting caught defrauding HMRC and the threat of jail time completely gone.

Simples.

[Craig@Clarity]

The questions to be asked is whether the course fees are wholly, exclusively and necessary for the purpose of the business? How will the company benefit financially from this?

For a donation to be allowable for tax purposes, it must be a recognised registered charity with HMRC.

Assuming that she has already paid for some fees herself and is not an employee already, the cost of the fees wouldn't be an allowable expense or deemed to be a bonus on succession of examination.