How to reclaim tax on self paid work training?

[binladensgoat]

Thank-you Malvolio.

Firstly, and sadly, it's not business related so you can't offset it against tax. the rule is "wholly and exclusively" and that means in connection with your fee earning work, not money spent to help you find fee earning work.

Secondly, you and Your Company are two completely separate legal persons, and tax for one does not affect tax for the other. Get that very clear in your mind or you will get into real trouble. Your personally owned property is nothing to do with any business you may own.

You're only filling out an SA because you need to decalre the extra income. Because it's personal income the taxman can't offset your losses against future earnings so he's doing the next best thing which is allow it against future taxes owed. End result is much the same of course.



As for setting up your own company, read the guide on the right and the "Guide to Freelancing" you can find at www.pcg.org.uk. then you will understand what's involved a lot more clearly.

HTH

[malvolio]

I have two questions about tax.

First of all I work in IT, and after my lost job finished in March, I spent £5000+ of my savings with a view to helping me get my next job. How can I claim back the tax (presumably 20%) on this sum, as it is a work related expense? FYI although I have always been a salaried employee, I have to do my own tax every year as if I was a self employed person as I own a small house that I let out.

Secondly, I have heard that there are tax advantages to creating your own company, and making yourself an employee of that company. However, last year I made a huge loss on my let house which was also around £5000 (I had a lot of maintenance work done among other things). The £5000 loss I made is put aside by the Inland Revenue against future 'profits' that I make on the house. If I make a newly created company the 'owner'of the house, will I lose the right to put aside last years loss against future profits?

Thanks in advance for your help.

Firstly, and sadly, it's not business related so you can't offset it against tax. the rule is "wholly and exclusively" and that means in connection with your fee earning work, not money spent to help you find fee earning work.

Secondly, you and Your Company are two completely separate legal persons, and tax for one does not affect tax for the other. Get that very clear in your mind or you will get into real trouble. Your personally owned property is nothing to do with any business you may own.

You're only filling out an SA because you need to decalre the extra income. Because it's personal income the taxman can't offset your losses against future earnings so he's doing the next best thing which is allow it against future taxes owed. End result is much the same of course.



As for setting up your own company, read the guide on the right and the "Guide to Freelancing" you can find at www.pcg.org.uk. then you will understand what's involved a lot more clearly.

HTH

[SueEllen]

Thank-you for your clarification. Incidentally, I did indeed inform the mortgage lender once I let it out. The mortgage has not changed to their buy to let product though.

I hope you informed them in writing.

Things said verbally have a habit of not being said on the customer side when things go wrong. If you haven't and can remember the date and rough time of the phone call then send them a letter now and get at least a proof of posting for it.

Also it doesn't need to change to a BTL product they just need to give you permission to rent the property out.

[binladensgoat]

Thank-you for your clarification. Incidentally, I did indeed inform the mortgage lender once I let it out. The mortgage has not changed to their buy to let product though.

If you set up your own company you are not actually self-employed under our tax system. You are an employee of that company. Normally you are also the only or one of the company's directors as well. You do not have to be an employee to be a director or vice versa.

Self-employment status is different. A self-employed person is liable for their business debts personally, while a director of a limited company is only liable in certain cases.

However unfortunately you will find that some companies and even some government departments don't know this difference.

Regardless of whether you use to live in the house or not, once you rent it out then you need to inform the mortgage lender. Otherwise you are in breach of contract with them.

[SueEllen]

MF, would I have to set up my own company to declare myself 'self employed'? I would not want to lose the tax rebate on the £5K loss. Incidentally, I do not have a BTL mortgage on my house, as I used to live in it until I found another job elsewhere and had to move away.

If you set up your own company you are not actually self-employed under our tax system. You are an employee of that company. Normally you are also the only or one of the company's directors as well. You do not have to be an employee to be a director or vice versa.

Self-employment status is different. A self-employed person is liable for their business debts personally, while a director of a limited company is only liable in certain cases.

However unfortunately you will find that some companies and even some government departments don't know this difference.

Regardless of whether you use to live in the house or not, once you rent it out then you need to inform the mortgage lender. Otherwise you are in breach of contract with them.

[binladensgoat]

Many thanks to all that took the time to respond, especially MarillionFan. It seems reclaiming tax on training is dead in the water.

MF, would I have to set up my own company to declare myself 'self employed'? I would not want to lose the tax rebate on the £5K loss. Incidentally, I do not have a BTL mortgage on my house, as I used to live in it until I found another job elsewhere and had to move away.

The issue here is your confusion
over your tax return. You mention that even though you are salaried you have to do a tax return because of your Buy to let.

Firstly that does not make you 'self employed'. To have that status you would have to register as that. If you had have been then yes you could have offset the cost of the training. But you are not.

Second you mention that you'd like to wrap your BTL up in a company so you can offset losses. Right, effectively back to point one. The income you receive from your let is declared. The costs involved is interest payments and the cost of anything to run it such as the £5k. You pay tax on any profit hence you need to declare it. If you make a loss it does not allow for you to get a tax rebate. If you had have been self employed though youn could have offset the training. It does not make sense for numerous reasons both tax and personal to try and put your BTL in a Ltd company, not withstanding that you would need to change your mortgage.

Now if you are planning to contract, either umbrella or LTD us the way to go. Your could retrospectively put the cost of the training into the LTd, but it would be your call but I don't think HMRC would except it if auditted. So a bit late.

If you're going to do something else then consider self
employed status.

[MarillionFan]

The issue here is your confusion
over your tax return. You mention that even though you are salaried you have to do a tax return because of your Buy to let.

Firstly that does not make you 'self employed'. To have that status you would have to register as that. If you had have been then yes you could have offset the cost of the training. But you are not.

Second you mention that you'd like to wrap your BTL up in a company so you can offset losses. Right, effectively back to point one. The income you receive from your let is declared. The costs involved is interest payments and the cost of anything to run it such as the £5k. You pay tax on any profit hence you need to declare it. If you make a loss it does not allow for you to get a tax rebate. If you had have been self employed though youn could have offset the training. It does not make sense for numerous reasons both tax and personal to try and put your BTL in a Ltd company, not withstanding that you would need to change your mortgage.

Now if you are planning to contract, either umbrella or LTD us the way to go. Your could retrospectively put the cost of the training into the LTd, but it would be your call but I don't think HMRC would except it if auditted. So a bit late.

If you're going to do something else then consider self
employed status.

[Clare@InTouch]

You'd have to sell the house to the company, incurring stamp duty and legal fees, and you'd lose the loss as it 'belongs' to you personally and can therefore only be set off against future profits you personally make from the same trade.

[NotAllThere]

Moved to Accounting/Legal.

Your training isn't deductable. Possibly, if you'd set up as a contractor before doing the training, it could have been. You might be able to do it retrospectively, but I doubt it.

As far as the house is concerned - talk to an accountant. Chances are, however, it's a BAD idea.

[binladensgoat]

I have two questions about tax.

First of all I work in IT, and after my lost job finished in March, I spent £5000+ of my savings with a view to helping me get my next job. How can I claim back the tax (presumably 20%) on this sum, as it is a work related expense? FYI although I have always been a salaried employee, I have to do my own tax every year as if I was a self employed person as I own a small house that I let out.

Secondly, I have heard that there are tax advantages to creating your own company, and making yourself an employee of that company. However, last year I made a huge loss on my let house which was also around £5000 (I had a lot of maintenance work done among other things). The £5000 loss I made is put aside by the Inland Revenue against future 'profits' that I make on the house. If I make a newly created company the 'owner'of the house, will I lose the right to put aside last years loss against future profits?

Thanks in advance for your help.