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Can a qualified professional claim for the cost of a part time university course to extend knowledge

I have a client who is a qualified practising physiotherapist. She has decided to study for a masters degree, this will make her services more attractive to prospective clients. She is qualified to do all work expected of a physiotherapist, having the masters degree will not increase her range of skills but some clients prefer to use a physiotherapist qualified at masters degree level. Can the cost of the degree be claimed as an allowable expense

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18th Jul 2012 06:50

Is she self-employed?

If she is self-employed, HMRC take the view that such expenditure is capital if it increases her knowledge.  Tax relief is not available.

If she is an employee and it is relevant to her work, then if her employer pays for the training I would expect it to be allowable and not to be a BIK on her.

If she is an employee and pays for it herself then it will not qualify for relief.

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Whilst I have no doubt that

taxhound is correct, wouldn't it be just to view this learning extension as a higher level of CPD, and allowable for self-employed purposes?

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18th Jul 2012 08:57

I would say

it depends on the facts of the case, but a masters degree is presumably costly both in £ and time, so I would be surprised if HMRC agreed this was just CPD.

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18th Jul 2012 09:21

Degrees

The clue is in the word "prospective". The Masters will put her in a position to pitch for additional clients/work and is not CPD which seeks to maintain ones' skills.

 

 

 

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18th Jul 2012 09:22

Grey area

A grey area - I like those!

The case for the defence is that it is a form of CPD which will result in additional business income, hence an allowable trading expense.  In my view as an accountant that is all you need - a case for the defence and not "hand's up, we tried it on and you've rumbled us."

So if this was my client we'd be documenting the circumstances and some relevant tax cases which favour our view.  Given that this is an area where the tax cases go both ways - some HMRC have won and some they have lost - this is achievable.

Yes, in the event of an enquiry I'd expect HMRC to put the counter-argument, fair enough.  That is HMRC's job.  Not my job.

In tax law, grey is the best colour!  And the way UK tax law has evolved, there is much more grey than black or white.

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18th Jul 2012 09:36

If Self Employed - No

Doesn't seem too grey to me because it leads to a new recognised qualification and is not merely CPD see http://www.hmrc.gov.uk/manuals/bimmanual/BIM35660.htm  which states;-

"You should therefore allow proprietors a deduction for expenditure that merely updates existing expertise or knowledge but disallow any expenditure that provides new expertise or knowledge (particularly where it brings into existence a recognised qualification like an Master of Business Administration)."

 

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I'm still with Mr Mischief on this

“There is some uncertainty whether the cost of proprietors of a business attending a training course, directly related to the business activity, is deductible in arriving at the profits chargeable to tax under Schedule D Cases I or II.

Where attendance at a course is intended to give business proprietors new expertise, knowledge or skills, which they lack, it brings into existence an intangible asset that is of enduring benefit to the business. We take the view that the expenditure is therefore of a capital nature, and deduction is prohibited by ICTA88/S74 (f).

On the other hand, where attendance is merely to update expertise etc. which proprietors already possess, the expenditure is normally regarded as revenue expenditure and will be deductible if it satisfies the “wholly and exclusively for the purposes of the trade” test in ICTA88/S74 (a)” - see BIM42105.

You should therefore allow proprietors a deduction for expenditure that merely updates existing expertise or knowledge but disallow any expenditure that provides new expertise or knowledge (particularly where it brings into existence a recognised qualification like an Master of Business Administration).

The "grey" area for me here is the phrase/word "new expertise". The case for the defence would surely ride on the fact that, given the OP's client is already a qualified practising physiotherapist, she is merely extending or expanding her initial knowledge and cementing that knowledge by way of a masters degree. These medical bodies now require a higher level of skill from their members and many Universities have acknowledged this and created greater levels of learning. However, the initial skill level remains similar. In my opinion the argument would hold that these courses/degrees merely update and confirm these skills?

Now, if she was embarking on a Masters degree in mathematics, that would be an entirely different thing all together.

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18th Jul 2012 10:26

HMRC Manuals

Just to add that the BIMs are not always reflective of the law, either precedent or actual. At the end of the day, we come back to the "wholly and exclusively" test. Only the OP knows the full story but I'm surprised that potential clients ask whether the physio has a Masters before taking the plunge.

 

 

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Same arguments as another recent query

See mine and others comments in this thread regarding the comments in BIM35660, which come from tax bulletin 1 and are now regarded by HMRC as "no longer current", and the Dass case.

http://www.accountingweb.co.uk/anyanswers/question/training-self-employed-piano-teacher

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18th Jul 2012 10:52

The problem is not really "wholly and exclusively" but "revenue or capital".

A course to update skills (brief and inexpensive) would be revenue but a degree course lasting months/years and leading to a recognised qualification would surely be capital.

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18th Jul 2012 11:07

I rest my case!

Various posts already from both sides on this one.

Hence a grey area.  Hence good news!

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By SteveOH
18th Jul 2012 12:14

Infinite shades of grey

mr. mischief wrote:

Various posts already from both sides on this one.

Hence a grey area.  Hence good news!

There was a great line from the TV series Kavannagh QC, in which James Kavannagh said: "It is our [the barrister's] job to turn infinite shades of grey into black and white". 

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It can't be capital

The improvement belongs to the proprietor who needs to be distinguished from the business.

The Dass decision is both unfortunate and incorrectly based in my view.

It is a matter of whether it is wholly  and exclusively for the purposes of the existing business, or whether it is, in part, to allow the proprietor to add new business to that which already exists in order to improve their income.

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Amusing

'. . . some clients prefer to use a physiotherapist qualified at masters degree level.'

Am I the only one amused by this assertion?

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