Training expenses

Training expenses

Training expenses
Training expenses are a deductible expense for a limited company and also exempt from being a benefit in kind on the employee if the training is related to the trade that the person does and improves their skills and knowledge. Any travel and accommodation expenses incurred while completing the training will also be allowable.
 
An example
A limited company has a single director-shareholder who is an experienced database developer. They have contracts with clients working on database development projects, and the director pays for a three-day refresher course 200 miles away. They pay for trains, hotels, meals, and the course itself. These would all be allowable expenses. If, however, after the course, the contractor decided to spend a few days doing some sightseeing and extended the hotel stay, this element of the trip, along with any others expenses, would be disallowed.
 
New Skills
For companies, the rules on acquiring new skills are very different than for sole traders, as the government tries to encourage companies to invest in their employees. HMRC will allow almost any work-related training costs if an employee has, or realistically could expect to have, work in that field. So, for example, a plumbing company could retrain employees to be bricklayers. However, HMRC would unlikely allow the same limited company to pay for flying lessons at the local flying club, so that they can achieve their dream of becoming a pilot. Almost any training which could be connected to leisure will also be disallowed. Employees who are closely connected to the company, such as directors and their family, should consider if the training cost really is wholly and exclusively for the benefit of the business. HMRC are much more likely to challenge an expense if it has no relation to the business and is for the sole benefit of a director-shareholder.

Academic courses
Scholarship income is permitted as a tax-free benefit for employees, but only where they are not connected to the director. Academic expenditure, such as degrees, including an MBA, on a director or their children will be deemed the parents’ earnings. We would therefore advise against expenditure on academic tuition for directors or their families. You can read more about what is permitted here.

Sole traders
Historically,  learning a new skill for sole traders was disallowable for tax as HMRC deemed it capital. However in the Spring budget of 2024 HMRC clarified that any training to maintain or update a current skill would be deemed an allowable expense and any new skills to keep apace with technology and may include training for new skills that would help the trade, such as a book keeping course to help develop the skills for running the business.  Training for something unrelated to your business remains capital and effectively a personal expense. 
 

 
 
 

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