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Sole Trader Training Expenses

I hope someone can help me with this one!

My sister has been trading for a number of years as an environmental consultant, on a sole trader basis.

She already has a BSc and MSc in Environmental Science and now, during the last year (2010/11) she has embarked on an Envirpnmental Law Masters Degree, in order to broaden her service offering.

This is costing her around £3500 per year.

I was hoping that she could offset this against her income, but it would seem that, if it is "new knowledge" she cannot, as she is a sole trader.

My question is really this:  Is there ANY way that this would be an allowable cost against the business?  It seems rather unfair that she will potentially be earning shed-loads more income from having this qualification, and will be taxed on the income accordingly, but cannot claim a deduction for the cost of the training.

Could she capitalise the cost and then offset it against future earnings?

Or, how about if she were to become a Ltd Co now (she has been saying she wants to go Ltd)?  Could she somehow carry forward these costs from last year to offset against company profits?

If anyone out there can help me I would appreciate it so much, I've only got a few weeks to sort it out for her! 

Many thanks......


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I don't agree with you

Matilda32 wrote:

It seems rather unfair that she will potentially be earning shed-loads more income from having this qualification, and will be taxed on the income accordingly, but cannot claim a deduction for the cost of the training.

I'd say it is unfair of your sister to expect to earn "shed-loads more income" (subject to tax) but share the cost of doing so with the rest of society.  She's perfectly entitled to save the money and continue to earn what she currently does if she wishes.

See these recent related threads:

Intangible asset training courses

Training expenses

I can't see a way that any relief can be obtained in the circumstances .  If she incorporates the "intangible asset" created is personal to her and can't be transferred as part of the business.  She could incorporate and then claim reimbursement plus future costs from the company under the work-related training (BIK) provisions, but she might then meet with an argument on W+E principles and under S.1064 CTA2010.


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04th Jan 2012 13:16

I agree with Steve

After all, what is the alternative?  Can I capitalise the costs of going to private school from the age of 12 onwards, including university costs, and deduct them off by income now that I have a well paid job?  After all, if I hadn't stayed on at school then I wouldn't be doing this job.

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04th Jan 2012 15:13

sole trader vs ltd co

As a sole trader expenses to 'update' already existing skills are allowable. training for 'new' skills are not allowable for a sole trader.

If she was an employee of a limited co then it would probs be allowable.


Best example is if someone wants to be a driving instructor, they can't claim the costs of their instructor training [since they are acquiring new skills to be in a trading position. However if they were a ltd co they could pay for an employee to be trained in anything that the business was going to use.


BTW ...I'm not an accountant so check it out properly!!!!!!!!!!!!!


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09th Jan 2012 21:12

Thanks for all your comments, they have (mostly) been very helpful.  I have indeed seen the arguments regarding the drving instructor, which is why I made the point that my sister was already in business for a number of years and this was in enhance her offering, not build a brand new business.  I do understand your points though (although I do think talking about being at school is stretching it a bit, just to make a point!).

Thank you all for taking the time to help me.

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09th Jan 2012 21:37

can I be controversial...........

I have never tested it but have read these before which might "grey" the water. 

If she is not diversifying significantly it should be possible to claim.

This theory has been discussed with accountants in mind at a seminar I attended a few years back. If you or I go on a CPD course arranged by ACCA/CCH etc on an area we don't usually cover - let's say I have never studied trust taxation but went on a cpd course all about trust taxation, the lecturer asked - would you as a sole trader practicing accountant disallow it - the answer is no, so why should you disallow for your clients.

The advice was to claim, if it is a grey area, and add a note in the white space to say that you have updated your knowledge in the general area (in this case environmental law) and so are making a claim for a deduction.

I think applying it to ourselves can turn the argument on it's head. (Or at least I was sold on that idea by the lecturer)



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10th Jan 2012 16:19

so if you were to test this grey area and claim the cost of training - where would it come under the self assessment expenditure part... other allowable business expenses?


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To answer GeordieLass's underlying question from another post, an MSc is unlikely to be considered a grey area.  HMRC generally regard the acquisition of a "high level" qualifiication by a sole proprietor as the acquisition of a capital asset.  See BIM35660.

It's difficult to fully answer that underlying question, without knowing the context.

Taking Ding Dong's example a little further though, if instead of a CPD type course on trust taxation, he took the STEP courses/exams and became a member of STEP, I doubt HMRC would accept that as being a revenue expense of his sole-trade.

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By Niko
15th Jan 2012 22:22

It would be quite unfair not to allow the deduction

I don’t understand why Steve and thisistibi gave Matilda such a hard time.

I think it is perfectly reasonable to want to deduct training costs that will directly impact on the future revenue earning capabilities of the person’s trade.  I don’t see how someone being self employed be can ever be cost to society.  After all, the additional income is subject to tax.   

But HMRC seems to see things differently and does not seem to value higher levels of education which would probably lead to higher tax revenues.  I was shocked to read that you are unable to deduct training costs for “new skills”. 

My question is what is the exact definition of a new skill?

What if someone has attained skills through a combination of experience and prior qualifications and wants to expand on that in a diversified manner? 

For example:

A practicing qualified nutritionist who has knowledge in health related subjects begins providing services to colleges by lecturing health related subjects part time, thereby contributing to their sole trader income. 

Let us assume that the lecturing does not meet the criteria of employment.

Soon after starting the lecturing the nutritionist begins studying a Professional Certificate in Education in order to improve her lecturing credentials and increase her chances of gaining access to more profitable lecturing slots and higher profile and paying institutions.

Would this qualification be considered “new skills”? 

The nutritionist clearly already has the skills to lecture as she is already lecturing and has the qualifications in her chosen subject matter?

Your thoughts on this would be much appreciated?

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