Can anyone think of a reason why a client of mine who owns and runs their own property management limited company (with just a handful of large corporate clients) couldn't use company funds to pay for a one year barrister retraining course, get a corporation tax deduction for the costs and not incur any liability to income tax on the benefit in kind?
s.311 of ITEPA 2003 suggests it's allowed, but it seems too good to be true to me...
http://www.legislation.gov.uk/ukpga/2003/1/section/311
Thanks!
Replies (9)
Please login or register to join the discussion.
Employee v Company
Does S311 not just prevent a tax charge arising on the employee?
There appear to be conditions that might be an issue:
311(3)(d) the employee attends it on a full-time or substantially full-time basis.
311(4)(b) the employee ceases to be employed by the employer before the end of the period of 2 years beginning at the end of the course and is not re-employed by the employer within the period of 2 years after so ceasing,
311(4)(d) the opportunity to undertake the course, on similar terms as to payment or reimbursement of amounts within subsection (1), is available:
(i)generally to the employee’s fellow employees or former fellow employees in that employment, or(ii)to a particular class or classes of them.
311(6)(a) The assumptions : that attendance at the course is one of the duties of the employee’s employment,
As far as a CT deduction is concerned, not sure if this is still the current thinking:
http://www.hmrc.gov.uk/manuals/bimmanual/bim47080.htm
"Where on the other hand an employee or director of a company, on whom the expenditure is incurred, has a significant proprietary stake in the business or is a relative of those who do, there is obviously a much greater chance that expenditure may have been incurred not, or not wholly, for business purposes but to provide the employee with some personal benefit. If that is the case then the expenditure is not deductible - the business purpose has to be the exclusive purpose. "
As I said ...
I'm not clear how 311 works generally and specifically how 311(6)(a) can sensibly be interpreted. By definition, retraining suggests learning something new and, therefore, outside the (current) duties of the employee. More so where (as 311 envisages) the employee is leaving the employment. Again, the company owner can create what terms they want but, as it's for their own benefit, it does look contrived - although that may not be fatal.
Attendance at the course being a duty of the employee could surely be made so easily enough?
Re-train as a barrister?
Once you have been called to the bar - a ceremony following completion of the original BVC (Bar Vocational Course) - you remain a barrister for the rest of your life.
Or are you saying that the client has never been a barrister and wants to train in a completely different profession? If so, they will need to do a two year course, unless they already have a degree in law - one year of Law Conversion course plus the year of BVC.
I might agree that there is no BIK on the employee, but I struggle to see how it could be deductible from a property management company's profits for tax purposes.