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Input Vat on start-up training course.

Input Vat on start-up training course.

Potential new client is going to train to become a helicopter flying instructor. She asks 'can I get income tax relief  and can I also claim back the vat I am being charged on this training course which is after all to enable me to become qualified to do so?'

Our answer is that no income tax relief is available on this initial set up training cost, but a cost can be claimed only when and if any further updating of technical skills are required in exactly the same way I undertake CPD. This I believe has always been the case and I have no reason to change my opinion. With regard to the input vat claim my initial reaction was that no vat could be claimed. This was on the grounds that as she can't fly at present then there is a personal motive as well as a business motive. (Unless an apportionment is allowed). Until she qualifies she can't chase for business so there is a problem anyway with intending trader status. I am sure that HMRC would not want to refund tax now if she never fulfills her ambitions. However on second thoughts as the training course lasts for 10 months (it's on an intensive basis) in ten months time if she then registered could she claim? Again as the course was a service the course costs are over the six month limit so still no valid claim BUT if the flying school invoiced monthly she might be able to claim the last six out of ten. Is this a possibility? When you consider that the costs are £55k there is a lot of vat at stake!

The client says that the place she intends to train with are adamant that vat can be claimed as their accountant has told them so. (At least it wasn't the man in the pub!) However I am not so sure. A seminar she attended run by the helicopter school also said that she could get income tax relief - but they would wouldn't they as they want the work! One further complication is that her husband is alraedy a client of mine and in any case where I say no and others say yes then this could mean loss of confidence by the husband and instead of gaining a client I could lose one!

Any help on this would be much appreciated as I am 'my head's in a spin' with this (sorry!).

Thanks in advance.


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24th Feb 2010 16:02

limited company

Could she not operate as a limited company in which case there would be tax relief on the training costs and should be no problems claiming the VAT.

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By DMGbus
25th Feb 2010 08:58

Time limit pre-registration VAT

The training course is a service (as opposed to a  supply of goods).

There's a 6 months time limit on the claiming pre-registration VAT on services (as opposed to 3 years for goods).

Therefore carefully choose the VAT registration date so that the training costs invoices are dated no more than 6 months prior to VAT registration date or if at all possible be VAT registered at the time of incurring the training costs to recover the VAT sooner rather than later.

The above applies to both sole traders and limited companies - unlike the deduction from profits rules as concisely well explained by Stephen Kendrew.

 PS. The VAT rules do not necessarily have to follow the deduction from profits rules - for VAT to be reclaimed it simply has to be legitimately charged to the VAT registered person for the supply of a business related service (or goods) that is so long as it is not on the list on non-deductible items [absent from which are training costs].




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