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Masters - tax deductible?

Hi

A photgrapher completes a Masters Degree in Documentary Photography / Photo Journalism. he is already an established (self-employed) photographer and did the course to update his existing skills / learn about the advancements in development techniques / using new equipment etc. He wants to claim the cost of the course as Continued Professional Development and I am unsure as to whether this is allowable. I know an MBA is not allowable but in the case of HMRC v Banerjee (see link - http://www.edftax.co.uk/2009/07/14/ewhc-62-2009-hmrc-v-banerjee/) the decision to allow the CPD costs was upheld.

I have been reading (and re-reading) HMRC leaflets - in particular this guidance by HMRC - http://www.hmrc.gov.uk/manuals/bimmanual/BIM42526.htm

Can anybody give me some advice please? Without keeping up to date with developments he will be unable to produce work of a high quality that will get him more work (and ultimatley pay more tax!) but there is a niggling doubt that it is acceptable. Many thanks.

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10th Jan 2011 23:23

Claim it and see

 

 

I'm not aware of any definative ruling one way or the other.

In a case like this, I'd be inclined to claim it, put a separate note in the "additional information" box along the lines of what you have said, and leave it to Her Majesties Revenue & Cock Ups to come up with a good reason why it shouldnt be claimed.

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11th Jan 2011 10:49

My opinion

My view would be that the masters degree is giving him an asset of enduring benefit to the business  - so the costs are capital and disallowable. That's certainly the attitude I have come across in investigations. As a rule of thumb I disallow anything that's going to add letters or appear on the letterhead.

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11th Jan 2011 11:59

Banarjee...

... has since gone to the Court of Appeal and she won.  It's not relevant though, as it's an employment expenses case and has unusual facts (albeit remarkably similar to a case that's been decided the opposite way).

Assuming when you say self-employed you mean self-employed, rather than employed by his own limited company (in which case Silva v Charnock may be of some interest), then it's allowable if it's updating/refining/advancing existing skills, but not allowable (because it's capital, as indicated in the previous post) if it imparts new skills (ie provides a means to new income).

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I'm with CD

Make the client put togther a very detailed justification i.e. new skills acquired, benefits to business etc. Post the whole lot in to the white space and wait and see. It is at least an arguable point if nothing else and therefore I'm not sure what you have to lose by trying as long as the client understands that it is not a sure thing.

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11th Jan 2011 14:46

If in doubt
I'm with CD 

Posted by Steve Holloway on Tue, 11/01/2011 - 14:40

 

Where there's doubt always make Her Majesties Revenue & Cock ups prove you can't claim it - you'll be surpriosed how often they cant and dont even try.  And by detailing it on the Return they cannot say they didnt know so have no comeback. 

 

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11th Jan 2011 15:15

Update of existing skills.
Many thanks. He is a photgrapher and videographer and has been for many years. I would say it's a definite update as his clients (weddings and bands) are demanding more "modern" approaches to photography so the old fashioned stills are still required but they want video footage of themselves backstage / preparing for wedding for their websites / youtube etc - much more of a rock and roll / behind the scenes at the gig type of filming. So although photographer is used to doing videos there are new techniques he needs to be accomplished at using along with more advanced types of camera . I blame that 'Dirty Dancing' Wedding Dance for changing the way memories are recorded! Thanks again for the reply.

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12th Jan 2011 13:40

In the minority

 I'm not convinced - if it was a week's course, no problem  but a master's degree.... BIM35660 counsels that you should "disallow any expenditure that provides new expertise or knowledge (particularly where it brings into existence a recognised qualification..."

 

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By frauke
17th Jan 2011 14:03

Disallow as self-employed

I would disallow as not doing the course would not stop him from continuing to work.   Doing a course to improve the type of work a person can do, is the same as learing a skill for the first time - which would not be allowable.

Having to requalify, to continue to work or do CPD, to continue to be qualified to work, would be allowable. In both cases without either requalifying, or doing the CPD an individual would have diffiuclty by either no longer having the qulification to do (or continue to do) the work which they were able to do before.

 

 

 

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17th Jan 2011 14:06

Main purpose?

If the main purpose of the training is to learn new skills (and it does sound like it, though we may not have the full facts) then the cost is disallowable as capital.

Whilst a claim for deduction might sneak in under the radar of HMRC, you should not knowingly claim deduction for something to which the client is not entitled, and on this occasion I would not therefore  be in favour of CD's approach.

Malcolm

Malcolm Greenbaum

Greenbaum Training and Consultancy Limited

IFRS, US GAAP, UK GAAP, UK Tax and VAT

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By dwgw
17th Jan 2011 17:37

Capital or revenue

I agree with that.  It's not a simple question of whether or not the training benefits the business - of course it does, or should.  The real question is whether it's capital or revenue expenditure.  From the evidence given, there seems here to be an acquisition of new skills, rather than an updating of existing ones.  If that's right, it's capital and disallowable.

It's also ... erm ... shall we say interesting to note the divergent opinions on what appears to be a fairly straightforward principle. 

 

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17th Jan 2011 19:29

well there is disagreement

i am firmly in the white box camp

if its capital as advanced might it not qualify for AIA or CAs

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18th Jan 2011 13:42

AIA on capital expenditure

Hmmmm!! Interesting - if it is capital then surely there would be an AIA? Thoughts please!

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18th Jan 2011 13:56

Capital but no allowance

Not everything that is capital gets an allowance. As this is an "intangible asset" and not "plant or machinery" etc no allowance is due.

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18th Jan 2011 13:58

AIA

You're talking about plant and machinery capital allowances... it's not plant and it's not machinery.

Letters after his name notwithstanding, if there are no new skills to speak of, I'd pursue a revenue option.  Prepare arguments for how he already had the skills and has only refined/enhanced those existing skills.

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18th Jan 2011 13:59

Not a qualifying asset

AIA is only available for plant and machinery (excluding cars).

The intangible fixed asset regime only applies to companies. Learning new skills would not be capable of recognition as an intangible asset on the balance sheet of a company as it does not represent an asset the company controls. As such, even if the case in point concerned a company, I cannot see how relief would be possible under these rules (now contained in Part 8 CTA 2009).

Malcolm

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By DAS
18th Jan 2011 16:32

Exam question

Your client held a BSc in Sports Science and started an MSc in September 2009 at the cost of £10k+ plus living (away from home expenses).  

She became self employed as a coach shortly after, and has just submitted her 2009/10 SA on that basis. 

She formed Ltd Company in April 2010, to provide coaching services, and completed her MSc in September 2010.

She recently commenced worked overseas.

Please discuss opportunities to minimise your client's tax bills.

 

 

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