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Can employer reduce my ACCA tuition fees?

Can employer reduce my ACCA tuition fees?

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I would like to know if I can get my employer to pay for my ACCA Kaplan tuition course (2 Papers)? Will he be able to apply for exemptions under: EIM01220 - Employment income: work-related training if not at least be able to pay for VAT which he will be able to reclaim back or any other way. Please help! http://www.hmrc.gov.uk/manuals/eimanual/EIM01220.htm

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By cheekychappy
05th Aug 2015 00:04

Who do you think your employer can claim the course fees from exactly?

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By julyaugust
05th Aug 2015 21:28

Thanks for the reply. 

Thanks for the reply. 

Claiming VAT form the fees. He doesn't really want to pay for my fees. But if I give him the fees ( off records) excluding VAT and then he pays for whole of my fees  (on record) and then claim the VAT as output VAT, which means I won't have to at least pay the VAT on my course. This is the minimum I would like. 

Regards

 

 

 

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By Wanderer
06th Aug 2015 02:54

So much

julyaugust wrote:
Thanks for the reply. 

Claiming VAT form the fees. He doesn't really want to pay for my fees. But if I give him the fees ( off records) excluding VAT and then he pays for whole of my fees  (on record) and then claim the VAT as output VAT, which means I won't have to at least pay the VAT on my course. This is the minimum I would like. 

So much wrong with this post, what you are attempting, your suggestion that he might claim the VAT as output VAT, 'give him the fees', on record / off records etc. etc.

Your post suggests that there may be good reasons why your employer doesn't really want to pay your fees. I would suggest that you continue to invest in your own training. Hopefully it will be money well spent in the long term.

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By julyaugust
05th Aug 2015 21:29

Who do you think your

cheekychappy wrote:

Who do you think your employer can claim the course fees from exactly?

 

Thanks for the reply. 

Claiming VAT form the fees. He doesn't really want to pay for my fees. But if I give him the fees ( off records) excluding VAT and then he pays for whole of my fees  (on record) and then claim the VAT as output VAT, which means I won't have to at least pay the VAT on my course. This is the minimum I would like. 

Regards

 

 

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By JLPrice
05th Aug 2015 08:56

From Employers Profit

I'm assuming you mean if he can claim the fees against their profit, and therefore reduce their tax bill?

 

If so, then as long as you are working in a relevant role to the ACC (which I assume you are), ad your employer pays for your fees, they can use these as an allowable expense and reduce their tax liability in the end.

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By julyaugust
05th Aug 2015 21:20

Thanks for the reply. 

Thanks for the reply. 

So he can claim the fees against their profits as long as I work in the relevant role. I am working as a sole bookkeeper job title being Accounts Assistant, that I guess is in the relevant role. Could you please provide me with the relevant link which I can show it to him to prove it. 

Thus it means that if he pays for all of my tuition fees (roughly £1100) which can then be classed as allowable expenses. 

Regards

 

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By julyaugust
05th Aug 2015 21:30

From Employers Profit

JLPrice wrote:

I'm assuming you mean if he can claim the fees against their profit, and therefore reduce their tax bill?

 

If so, then as long as you are working in a relevant role to the ACC (which I assume you are), ad your employer pays for your fees, they can use these as an allowable expense and reduce their tax liability in the end.

 

Thanks for the reply. 

So he can claim the fees against their profits as long as I work in the relevant role. I am working as a sole bookkeeper job title being Accounts Assistant, that I guess is in the relevant role. Could you please provide me with the relevant link which I can show it to him to prove it. 

Thus it means that if he pays for all of my tuition fees (roughly £1100) which can then be classed as allowable expenses. 

Regards

 

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By MrotsylliD
10th Aug 2015 10:40

...

Thanks.

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By Steve Kesby
06th Aug 2015 15:17

What the OP wants to achieve...

... can be done, perfectly legitimately, with no risk of committing moral terpitude, by way of the employer agreeing to pay for the tuition and the employee accepting a reduced salary for a period of time. Everyone is then a winner.

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By Steve Kesby
06th Aug 2015 18:44

@ Basil

Part of the way in which I would propose the arrangements between the employer and employee to proceed involves a request under section 63D of the Employment Rights Act. :)

I was assuming that the employer would, under the arrangement, take responsibility for procuring a supply of training to one of their employees, to facilitate recovery of the input VAT.

I have become a member of various professional bodies, following training provided at the expense of my employers over the years. I am sure that they have recovered the VAT, and have done so correctly.

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By Steve Kesby
07th Aug 2015 10:31

My point Basil...

... is that since the existing facts are an issue, the parties might by agreement alter their respective positions so that the facts do then become tax efficient. An approach authorised by the House of Lords in the Duke of Westminster.

The employer will, after all, benefit from a better trained bookkeeper if the training is undertaken. Having happier, better trained staff.

Are you suggesting that a supply of staff training to an employer which has the effect of improving the morale of a member of staff receiving the training, as well as improving their skills as a bookkeeper, is not used for the purpose of any business carried on by him [the employer], simply because the employer did not initially want to pay for it.

As you have pointed out to me, the test for VAT is different to the test for direct tax purposes; the test is not the purpose of the expenditure, but whether or not the supply is used for the purpose of the business. VIT43700 refers.

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By justsotax
07th Aug 2015 17:10

Basil...I trust

you are as attentive when it comes to claiming on behalf of your client.  Although I worry what your view if of salary sacrifice (have you reported it for being a tax avoidance scheme...?!). 

 

Not suggesting that you don't technically have an argument, but 'we' are here for the client, not for the revenue - especially when it comes to offering advice and options as regards to the different ways to 'skin a cat' so to speak. 

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By Steve Kesby
09th Aug 2015 13:22

Not a salary sacrifice

What I am suggesting is not a salary sacrifice arrangement. There are two consequences to a salary sacrifice in this context.

First the salary sacrifice is consideration for an onward supply for VAT purposes, meaning that the desired VAT saving is not achieved.

Second, it is arguable (although I do not believe that HMRC have ever taken the point), that the existence of the salary sacrifice would cause the work-related training exemption to fail, under the remuneration exclusion in ITEPA 2003, s 253(2(c).

Basil is, however, incorrect that the arrangement I have suugested might take place offends any statute to the point of preventing the input VAT recovery (and achieving the other tax effects) that I have suggested. Neither does it involve any deception.

I am simply suggesting that the employer and employee have only, as yet, had the first in a series of conversations.

Conversation 1

Employee: Will you pay for my ACCA course fees for me? It will make me a better bookkeeper.

Employer: How much is it?

Employee: It is £2,000 plus VAT, but you would be able to recover the VAT.

Employer: I already pay you an annual salary of £20,000, and I pay employer's national insurance of £1,640 on top of that. I cannot afford to pay another £2,000 on top of that. You will have to pay it yourself.

 

The OP is now proposing a second conversation.

Conversation 2

Employee: Do you remember last week we were discussing my ACCA course costs, and you said that I would have to pay them?

Employer: Yes?

Employee: Well if I pay them, it will cost me £2,400, because I can't recover the VAT. If you paid them though it would only cost you £2,000, because you can recover the VAT, and there would be no benefit in kind, because it would fall in the work-related training exemption.

Employer: Yes, but I said that I couldn't afford to do that on top of your salary and the national insurance.

Employee: But I could just give you the £2,000 back, and nobody need know. What do you think?

Employer: I think it sounds dishonest, but I will speak to my accountant.

[background noise]Raucous applause from the AccountingWEB massive.[/background noise]

 

Conversation 3

Employer: One of my employees want me to to pay their ACCA course costs of £2,000, plus VAT. I already pay them a salary of £20,000 plus employer's national insurance of £1,640 though. So I told them I could not afford it. They suggested that they just pay me the £2,000 back, and nobody would know, but I thought that might be dishonest?

Accountant: That would be dishonest, but your employees are entitled to request training under ERA 1996, s 63D, and under s 63F you are obliged to consider it. Here is what I suggest you do...

 

I also write scripts for the Archers!

Conversation 4

Employer: We have discussed the costs of your ACCA tuition a couple of times over the last few weeks, and I discussed it with my accountant yesterday.

Employee: Oh yes?

Employer: My accountant says that you are entitled to request training under ERA 1996, s 63D, and under s 63F I am obliged to consider it. So I have taken our first conversation about this as a request under s 63D, which I have duly considered under s 63F.

Employee: Yes?

Employer: As I have said previously, I cannot afford to pay these training costs of £2,000 on top of the salary of £20,000 that I pay you, plus national insurance of £1,640.

Employee: Oh.

Employer: Yes. The problem is that you are a regular employee, with a regular employment contract, on a full salary, and not a trainee, on a training contract, on a trainee's salary.

Employee: I see.

Employer: What I am willing to do is offer you a one-year training contract, under which I will contract for, and pay the costs of, your training, and under which you will receive a trainee's salary of £17,500. I will also pay for any exam costs, and allow you an additional week for revision and taking the exams over what you would otherwise have had to take out of your annual leave

Employee: Okay. That is a reduction of more than the VAT inclusive cost of the training though.

Employer: Yes. I need to explain the consequences of that to you. With your current salary of £20,000, you pay tax of £1,880 and employee's national insurance of £1,430, leaving you with £16,690. After paying for your training, which would cost you £2,400, you would have £14,290 left.

Employee: Yes. That is how I had calculated it too.

Employer: Under the training contract your salary would be £17,500, on which you would pay tax of £1,380 and national insurance of £1,130, leaving you with £14,990, and no training to pay.

Employee: So I would actually end up £700 better off over the year!

Employer: Yes, but your pensionable earnings, and your earnings for the purposes of obtaining any finance would only be £17,500, rather than £20,000, as they would be for any other purpose for which your income is relevant.

Employee: I understand.

Employer: The training contract will supersede your employment contract and will only last for a year. At the end of the year I may offer to resume your employment contract, or may offer you a further training contract. I may do neither.

Employee (thinking they will not get rid of me, I am too good): Okay.

Employer: If you leave during the one-year training contract, or are subject to any disciplinary dismissal, you will be liable to repay any costs that I have incurred on your training in full. These costs will be deducted from your final pay, and you will be liable to repay any shortfall. Notice periods will be as they are under your existing employment contract.

Employee: I am giving up quite a lot. Is it possible to increase the salary to £18,000?

Employer: You have worked here a while already. I am willing to split the difference and make the salary £17,750. Is that agreeable to you?

Employee: Yes.

Employer: You would like the training contract?

Employee: Yes please.

Employer: I will get my secretary to type up minutes of this meeting, and a training contract for you to sign.

 

Now the employer is rubbing their hands too. The cost had been £21,640, and the cost now is £21,080 (£17,750 + £1,330 NIC + £2,000 training), so before tax they have saved themself £560 too. Although maybe this will be swallowed up with the exam costs and additional week's leave.

The last minute negotiation from the employee also banked them an addition £170 (£250 x 68%), bringing their saving to £870.

In real life, people can and do alter their positions in the course of a negotiation. The tax consequences flow from what the final contractual position is; not what it once was, or may have become had negotiations stopped half way.

There has been a genuine alteration in contractual position on both sides, under which the employer will procure and pay for (and be the recipient of) the supply of training, and being for the purposes of an employment in the business, the input VAT is recoverable. The training costs are tax deductible and the work-related training exemption prevents any benefit in kind charge on the employee

As I say. Everyone's a winner. It's even beneficial to the economy, having a better trained workforce

I did exactly such a deal with my then employer to undertake my own ACA training contract many years ago. No laws were broken, or statutes offended. It was all perfectly ethical, moral and above board.

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By Steve Kesby
09th Aug 2015 13:00

Duke of Westminster

Basil is also incorrect in his view to suggest that the Duke of Westminster is no longer good law, if that is what Basil is suggesting. The principles established there and in the Ayrshire Pullman case are still good law and have not been interfered with by later precedents, although they may have been misunderstood prior to those later precedents

The principle established is simply that if there are two (or more ways) of achieving an effect, and the way that is chosen to achieve that effect happens to be the one that results in the least amount of tax under the operation of statute, then there is no reason for the courts to interfere with the operation of the statute; it is a matter for the lawmakers.

The view has been popularised (probably by HMRC) that Ramsay (and subsequent case law) changed that. It didn't. Ramsay considered a matter that stepped outside of these precedents; the interposition of a series of artificial, commercially unnecessary, steps in moving towards an intended outcome.

The principle in Ramsay is that you look through all of these steps, looking at what has been achieved economically and combine them into a single composite transaction. You then examine that composite transaction against the intention of the lawmakers, as evidenced in the legislation, and the actual transactions (and mischief) at which it was directed.

The Ramsay principle does not affect a situation, where route A (with its real consequences) is chosen over route B (with its real consequences).

What I have proposed is a choice of one way of going about achieving the desired route over another. The parties will have genuinely altered their respective contractual positions, which has real consequences

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By Steve Kesby
10th Aug 2015 10:55

Same plan, Basil

And same Basil, plan.

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