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Are expenses incurred for a "non-trading" "business associate" allowable?

Are expenses incurred for a "non-trading" ...

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I am in the process of moving my current one-man software development consultancy/contracting business towards a mix of software consultancy and video production - initially supporting the video production financially with the consulting and in time moving to mostly video production. In this initial period I am therefore undertaking a lot of training to improve various skills. I will PROBABLY also be utilising an associate to assist me in certain tasks. This person will be paid for their time but will NOT be an employee. If this associate accompanies me on certain training events, attends conferences etc, is my company able to pay the fees for their attendance and treat that as an allowable expense? If not, how would that expenditure be treated? Would they as an individual - who I'm assuming would need to declare this additional "pocket money" income on a tax return that they do not currently have to complete - have to treat the paid fees as benefits in kind, which would then cancel out against the "expense" that wasn't actually incurred?



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By stepurhan
26th Jul 2010 13:44

Not wholly and exclusively for business

You say they are not an employee of the business. In fact, you even go on to say that they aren't even associated with the business in any solid waY (PROBABLY isn't the same as a fixed contract). On that basis, why would you expect payments for training of an unconnected person to be business expenses? If they were an employee then you should be able to get a deduction for training, assuming that it is relevant to the business. As an independent contractor, I would be very surprised if you could obtain a deduction, even with a fixed contract in place. Either they would be working for you full time (and hence likely an employee, not an independent contractor) or they wouldn't, in which case, even if the training was relevant to your business, the individual would benefit (in being better trained for work he does for others) and hence not solely for your business. I hope you are also aware that, as a sole trader, the training isn't deductible for you either for similar reasons (you are expecting to use it in your own business but it equips you for an employed position as well)

Benefit in kind rules are irrelevant, these only apply to employees. You are asserting that this person is not an employee.

As you are not paying them for work done, I am not 100% certain on the treatment of the fees from their point of view if you went ahead and paid them. I would be inclined to argue that the arrangement put these more in the nature of gifts (and hence not taxable income) but I would do more research on this point if I was acting on their behalf.

As a final point, I would observe that, on the facts presented, there may be issues with your assertion your associate is not an employee. They have not filled in a tax return before so are not currently self-employed. It sounds like they are exclusively going to be working with you on this new business. (no other customers). You are planning to provide a benefit normally reserved for employees (the training events) You both need to be very sure on this point before you proceed and detailed professional advice is advisable.


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By whopkinscom
26th Jul 2010 14:39

Thanks for the quick response...

Certainly some food for thought there. Especially as I have some software development training courses (some directly related to current work , some not - but that could be the subject of a whole other question) I am planning in India at the end of the year.

It strikes me from your reply and a little bit of subsequent digging that the "free training", or more accurately "conference attendance" in the particular case I am thinking of, would better be treated as "Business Entertainment". And even if it was not allowed as an expense against corporate tax the other "not well asked" part of my question was how to account for it as I want the company and not me as an individual "to pay for it". I guess that it just comes out of taxable profits as it is company money and not directly mine.

Thanks again,


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