Fees paid by an employee to an employer

Can an employee claim tax deductability on fees paid to an employer on leaving?

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An employee who recently left her firm was obliged to pay back several thousand pounds relating to training costs which her employer had incurred for her training whilst she worked at that company.  The deal was that if she left within two years of such traininig she had to pay the amount back to her employer - which is what happened.  Is it possible that she can claim this cost as a tax deduction (ie it should come off her gross taxable salary for the year so that she can get an income tax rebate)?

Thanks

Peter

Replies (19)

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By Hugo Fair
25th Apr 2023 13:52

Depends on the precise wording of the original (training) Agreement ... but, by default, absolutely not.

The fact that the individual owes someone money in itself has no bearing on remuneration for their employment - unless it is so specified in that Agreement.
A sum owed (whether to the employer or to any other 3rd party) is just that - a debt to be paid from net earnings.

Thanks (7)
Replying to Hugo Fair:
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By peterharding
27th Apr 2023 09:30

Hi Hugo,

Thanks for your comments. The contract states the following:

21. Proportionate Reimbursement of Training Cost
If you cease your employment with the Agency after registering for the final APC assessment or within one year following election to RICS, you will undertake to repay to the Agency that part of the cost incurred by the Agency as is proportionate in accordance with the following scale.
PERIOD IN WHICH EMPLOYMENT ENDS PROPORTIONATE FEES:
After registering to sit the final APC assessment: £l ,OOO
Within 1 year of election to RICS: £2,000

Would that help or does your advice remain that my client can't claim this cost as a deduction?

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Replying to peterharding:
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By Hugo Fair
27th Apr 2023 11:38

Given that you're responding to my comment:
"The fact that the individual owes someone money in itself has no bearing on remuneration for their employment - unless it is so specified in that Agreement"
... how do you interpret your extract from the Agreement?

I see nothing other than a debt, which has no mention of any relationship to prior earnings, being triggered. Basically the same as a penalty clause saying that an employee will be liable for cost of repairs to her/his equipment when leaving.
In neither of those cases is the cost deductible from an EE's taxable earnings.

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Replying to Hugo Fair:
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By peterharding
27th Apr 2023 15:19

Thanks Hugo for your various replies and everyone else. Looks like this one is completely dead. One suggestion that it could be treated as a negative income seemed possible but that also has been plausibly refuted by someone else due to the lack of a specific income stream related to the training.

I have appreciated the combined wisdom of all contributors, so thanks to all

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RLI
By lionofludesch
25th Apr 2023 13:52

I vote no.

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By Jane Wanless
25th Apr 2023 13:58

The usual solution is for the new employer to pay the old employer, as the new employer is benefitting from a trained member of staff.

Is it too late, or are the skills not relevant to the new employment?

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Replying to janewanless:
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By Hugo Fair
25th Apr 2023 14:03

It might seem logical, but 'usual'?

I've never encountered that solution ... and would be concerned that new employer is paying a debt of their new employee (for whom this would seem to be taxable)?

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Replying to Hugo Fair:
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By lionofludesch
25th Apr 2023 14:13

Sounds like a transfer fee.

Which, incidentally, were never taxable on the employee.

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Replying to lionofludesch:
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By Hugo Fair
25th Apr 2023 18:07

Sporting accounts are not my field (see what I did there!) ... but I would never have expected a transfer fee to be "taxable on the employee".
Why would it even crop up as a possibility (given that the transfer is neither directly enriching the player nor paying off her/his outstanding personal debt) - or have I misunderstood the concept?

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Replying to Hugo Fair:
RLI
By lionofludesch
25th Apr 2023 18:14

Hugo Fair wrote:

Sporting accounts are not my field (see what I did there!) ... but I would never have expected a transfer fee to be "taxable on the employee".
Why would it even crop up as a possibility (given that the transfer is neither directly enriching the player nor paying off her/his outstanding personal debt) - or have I misunderstood the concept?

Don't go into the murky world of transfer fees in the brown paper bag era ....

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Replying to lionofludesch:
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By johnjenkins
26th Apr 2023 09:37

You leave Cloughie et al alone. I bet Sepp Blatter got a wheelie bin.

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Replying to Hugo Fair:
By SteveHa
27th Apr 2023 10:01

Hugo Fair wrote:

S(given that the transfer is neither directly enriching the player nor paying off her/his outstanding personal debt)

In the circumstances quoted in the OP (I know that you digressed) and the extract from the contract, surely if the new employer paid the old employer the new employer would be meeting the employee's pecuniary liability, and so it would be taxable again.

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Replying to SteveHa:
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By Hugo Fair
27th Apr 2023 11:30

Quite ... as per my earlier post at 25th Apr 2023 14:03:
"I. . would be concerned that new employer is paying a debt of their new employee (for whom this would seem to be taxable)?"

One of the 'joys' of this site can be trying to follow the threads which get so knotted!

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Replying to Hugo Fair:
By SteveHa
27th Apr 2023 13:29

Yup - I missed that in your reply. I miss the old days of a linear thread.

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Replying to janewanless:
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By Bobbo
25th Apr 2023 15:38

janewanless wrote:

Is it too late

OP's phrasing does strongly suggest this is in the past.

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By David Ex
25th Apr 2023 18:45

“Fee” seems to be a strange choice of words.

https://www.google.co.uk/search?q=repay+training+site:www.accountingweb....

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Replying to David Ex:
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By Hugo Fair
26th Apr 2023 12:04

Which is one reason why my original response opened with "Depends on the precise wording of the original (training) Agreement"

OP referred to "training costs which her employer had incurred for her training" - which suggests EE didn't receive extra pay with which to pay the training bills (so the question of whether that extra pay was/wasn't taxed at the time doesn't now arise).
Hence my assumption that EE has now triggered a debt payable to ER, rather than being asked to repay some previously paid 'earnings' (which *might* have had tax consequences).

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By taxdigital
26th Apr 2023 22:22

Depending on further information as to the terms of the contract and the facts, there is an argument for "negative earnings" (s.11 ITEPA) followed by relief under s.128 ITA 2007. This was decided in favour of the taxpayer in HMRC v J Martin [2014] UKUT 0429.

https://assets.publishing.service.gov.uk/media/57664367e5274a0da30000b3/...

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Replying to taxdigital:
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By Bobbo
27th Apr 2023 14:43

Key difference being that case appears to relate to repayment of income which was initially taxable. Whereas in OP's scenario the training costs were (presumably) exempt as work-related training.

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