The government has created a new web-site for employers and employees to use their extended homestays in a constructive way, by obtaining new skills and refreshing old ones:
The Skills Toolkit is made up of free online courses, tools and resources to help acquire and improve digital and numeracy skills. The Department for Education has consulted some of the country’s leading educational experts and employers to make up a collection of high quality resources to suit a range of interests and skill levels.
What is the situation, however, whether you or your employees need to provided training, which, unfortunately, must be paid for?
Training paid for by employees – tax treatment
Tax relief will not normally be given if an employee is paying for their own training, even if the purpose of the training is to help them improve in their job.
If an employee pays for their own training and is reimbursed by their employer, this will count as a ‘benefit in kind’, which will be taxable.
Training paid for by employers – tax treatment
Where training is paid for by the employer, the tax situation is different. On the whole, training which enables employees to better do their jobs will be tax deductible. This even includes general training, which may not have an immediate impact on their work.
In tax terms, it is therefore better for employees to ask their employers to pay their training expenses where possible, perhaps using a salary sacrifice scheme where necessary.
Allowable training expenditure
There is no restriction on the way the training can be delivered. Self-tuition packages, computer based training, distance learning, work experience or work placement and informal teach-ins are all acceptable as are more formal classroom based methods. It does not matter whether training is delivered internally or externally, or on a part-time or full-time basis.
A wide range of practical and/or theoretical skills will qualify for exemption so long as the skills are relevant to the employee. Where leadership and team skills are appropriate to the employee, participation in activities such as Outward Bound, Raleigh International, or Prince’s Trust will qualify. Work related first aid and health and safety courses will also qualify.
Some employers operate Employee Development Schemes, often aimed at those employees with low skills levels. These seek to improve an employee’s attitude towards training by commencing with enjoyable courses as an introduction to more concentrated job-related training. All elements of genuine schemes will qualify.
Employers must take care to ensure that they do not provide an employment inducement which is not in any way connected with acquiring knowledge, skills, or personal qualities which satisfy the definitions of work-related training. For example safe-driver training, taken up by those with a company car, would qualify whereas a day of Formula 1 driver training would not.
Training expenses include books and specialist software related to the subject matter as well as travel expenses to an from the training venue.
Self-employed – a complex area
The tax situation is different again for self-employed workers, who can deduct as allowable business expenses, the costs of training that helps improve the skills and knowledge used in their business (for example, refresher courses and training required to maintain membership of a professional body). The training courses must be simply related to the business.
However, the self-employed cannot claim for training courses that would help them:
- start a new business
- expand into new areas of business, including anything related to their current business
How does this look in practice?
Jill is an electrician who went on a training course to update her knowledge on new legislation regarding electrical work, tax relief would be available to her. If, however, she decided to additionally train as a plumber, this wouldn’t be deemed allowable for tax relief because it is to acquire a new skill that isn’t wholly for the benefit of her existing electrical business.
However, whether the training is an ‘investment’ or an ‘expense’ must be considered. If it is an investment, such as learning how to develop new products, technically this is a capital item and capital allowances should be claimed. If you or your business needs to incur substantial training expenses, it is advisable to take our advice on planning this expenditure.
SRC-Time are one of the South East’s leading accountancy firms in advising individuals and businesses in all aspects of their accounting and tax affairs and we are able to assist in any issue raised above.
Our expert team is available to provide you with advice and can be contacted on 01273 326 556 or you can drop us an email at firstname.lastname@example.org or speak with an account manager to get any process started.