Non-Work-Related Training

Director's non-work-related training paid for and arranged by employer (her company).

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Hello All

Head isn't in gear today. Company arranged and paid for director's non-work-related training. Can someone give a definite tax treatment, please? I know it isn't corporation tax deductible, but what about paye? If it helps, training was done to enable the start of a new specialised profession/business. 

Thanks in advance

J

 

Replies (40)

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By David Ex
16th Dec 2021 13:25

Not sure there’s sufficient information to give a definitive response.

Why has the company arranged the training and then paid for it?

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Replying to David Ex:
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By JessicaRain
16th Dec 2021 14:06

...duplicate. please ignore

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Replying to David Ex:
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By JessicaRain
16th Dec 2021 13:53

Thanks, David.
Company arranged it because Director thought it was okay to use the company's finances to pay for it as the increased income would be come into the company. Sum was approx £20K - paperwork, etc all in order. Please read non-related as new skills.

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By Dib
16th Dec 2021 13:18

Somewhat agree with David Ex but I'd be fairly confident it is CT deductible either as it is a BiK on the director (probable) or generally deductible as in some other way W&E for the purpose of the company's trade (less probable). It is not acceptable to disallow for CT to avoid the director copping a BiK!

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Replying to Dib:
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By JessicaRain
16th Dec 2021 14:05

OK, so it looks like allow for tax and treat as BiK. I thought the company entering into the contract with the training company would make a difference.

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By AndyC555
16th Dec 2021 13:50

EIM 01210 is a good place to start.

If not work-related it's likely to be a BIK.

Why would you think it's not deductible for the company? It's part of the company's reward to an employee. If the company bought her a watch or a set of golf clubs or paid for a 2 week holiday or gave her a cash bonus which paid for any of those things it would be an allowable deduction for the company.

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Replying to AndyC555:
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By JessicaRain
16th Dec 2021 14:03

Hi Andy
The training was done to acquire completely new skills - totally unrelated to the company's business, and the amount is considerable. I was thinking not taxable in the company's hands (apart from class1a insurance) and not taxable in the director's as arranged and paid for by the company.

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Replying to AndyC555:
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By JessicaRain
16th Dec 2021 14:08

EIM 01210 only covers work-related training.

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By JessicaRain
16th Dec 2021 14:12

The info here appears to indicate that only class 1a ins is applicable. https://www.gov.uk/expenses-and-benefits-training-payments/what-to-repor...

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By Hugo Fair
16th Dec 2021 14:55

OK, I'll bite ...
* What kind of training costs £20k?
* What restrictions were placed on Director (regarding repayment on leaving etc)?
* What business plan exists showing the need for this investment by the company?
Hint: in the absence of the latter, it'll be hard not to have it seen as being individual who gains the benefit (hence BiK).

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Replying to Hugo Fair:
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By JessicaRain
16th Dec 2021 16:02

- Really specialised engineering training. I saw all the invoices - all above board. Current company is in the caring industry. Director genuinely believed she could use the same company for both types of work.
- None (will this make any difference?)
- None (bearing in mind the gap between current and proposed income streams, will this help? Probably too late now as a new ltd company has been set up)

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By Tax is always taxing
16th Dec 2021 15:07

I'm confused, you said the director paid for it out of the business because the income would come into the business? But it is non work related? Is the company diversifying?

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Replying to Tax is always taxing:
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By JessicaRain
16th Dec 2021 15:56

Yes. Company was diversifying. Months afetr the year end, director decided a separate company would be better, so one has been incorporated.

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Replying to JessicaRain:
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By Hugo Fair
16th Dec 2021 16:16

So, whilst I'm still curious as to what kind of training costs £20k, the training can not be part of a business plan showing need for this investment by the company!

So it's the individual who gains the benefit - and hence the cost is a BiK provided by original company (with all associated Tax/NI costs due).
[Now, if she'd incorporated 2nd company prior to training ... but she didn't!]

EDIT: just seen your response above that crossed with this - but doesn't really change my opinion. [Still sounds a lot of money for Training and appears to be wholly unrelated to business of company that paid for it.]

Sounds like you need to have *that* conversation with the Director ... the one where you explain to her the difference between her as an individual and the company (of which she may, for all I know, be the sole shareholder).

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Replying to Hugo Fair:
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By JessicaRain
16th Dec 2021 16:41

Thanks. I agree.. I was looking for magic. Will speak to her before xmas so she doesn't spend that tax that needs paying. P11D is long overdue.

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By nick farrow
16th Dec 2021 16:22

I don't understand why training cost should be a BIK if the company's trade (current or future) is going to benefit (even if new skills as we are not talking about s/e here). of course putting the new trade into a newco scuppers that plan

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Replying to nick farrow:
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By JessicaRain
16th Dec 2021 16:43

Interesting. I thought it had to be work-related ie related to existing business/industry. New company hasn't started trading, and the intention when the fees were paid was to trade through the pre-training company.

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Replying to nick farrow:
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By gillybean04
16th Dec 2021 19:11

Lots of benefits in kind can also provide a benefit to the employer. But the BIK rules are concerned with whether there is a benefit to the employee, not the employer.

Which is why it's existing skills only, not new.

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By nick farrow
16th Dec 2021 16:22

I don't understand why training cost should be a BIK if the company's trade (current or future) is going to benefit (even if new skills as we are not talking about s/e here). of course putting the new trade into a newco scuppers that plan

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By Tax Dragon
16th Dec 2021 16:45

OP, I suggest you read the legislation.

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Replying to Tax Dragon:
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By JessicaRain
16th Dec 2021 19:59

Thank you!

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Replying to Tax Dragon:
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By The Dullard
16th Dec 2021 20:36

+1

They're certainly not getting to the right answer here. I think it satisfies the "likely" part of the definition of work-related training myself, based on the information given.

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Replying to The Dullard:
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By Hugo Fair
16th Dec 2021 22:13

Without intending to argue the point (especially since we know next to nothing of relevance in the details), but why do you 'think it satisfies the "likely" part of the definition of work-related training'?
As I understand it, the training was undertaken in advance of any potential work in the newly qualified arena even being identified (let alone deciding which company might be the provider of such work), so how is that work-related?
Are we arriving at different assumptions? Or have I misunderstood something?

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Replying to Hugo Fair:
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By Tax Dragon
16th Dec 2021 22:43

Have you read ss2?

My point in referring to the legislation is that that tells us what the rules actually are. We don't have to guess, presume or invent. We can look.

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Replying to Tax Dragon:
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By Hugo Fair
16th Dec 2021 23:06

TBH, no (as you can tell). My 'point' related not to what the legislation says about the rules, but about trying to interpret what OP's client had intended when the training was booked ... and whether this was planned to be of benefit to the payer (the company).

FWIW, EIM01220 states "For the purpose of the exemption in Section 250 ITEPA 2003 (see EIM01210), “work- related training” is defined as any training course or other activity which is designed to impart, instil, improve or reinforce any knowledge, skills, or personal qualities which:
* are, or are likely to prove, useful to the employee when performing his/her duties or
* will qualify or better qualify the employee to undertake the employment, or to participate in charitable or voluntary activities arising through the employment."
And continues "The training must relate to the employee’s current employment or to a related employment".

I can see no evidence (in the admittedly small pool of facts set out) to suggest that this particular training was in any way related to current or related employment by the paying company ... any benefit to the company could only accrue due to a new employment (delivering a service or whatever that is new to the company).

I'm currently snowed under with an apparently infinite number of due diligence questionnaires being thrown in my direction, which is why I haven't gone off scouting the legislation, but happy to take a look later if you'd post me a link to the specific point you see as relevant.

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Replying to Hugo Fair:
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By The Dullard
17th Dec 2021 00:27

Is being the director of a company embarking on a new venture a new employment. It seems to be the same directorship to me. There's also s 311 to consider, of course.

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Replying to Hugo Fair:
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By The Dullard
17th Dec 2021 00:21

If the company has an intention to branch out into a new area, what do you think the duties of the person responsible for "steering the ship" are likely to involve?

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By David Ex
16th Dec 2021 22:01

There have been a couple (from memory) of questions about dentists’ training to acquire new skills. Might be worth a search; there were some interesting posts.

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Replying to David Ex:
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By The Dullard
17th Dec 2021 00:24

They would have been self-employed though. The point for a company situation is that the training is remuneration in the first instance, which makes it an allowable deduction from profits; the question is then whether the benefit is taxable on the director or satisfies the requirement of an exemption.

The OP has started from a premise that the training is not work-related, but then gone on to recount a set of circumstances that appear to make that starting premise fallacious.

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Replying to The Dullard:
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By Hugo Fair
17th Dec 2021 01:14

Thank you for making clearer the logic flow that I was trying to drive at ... first an allowable deduction from profits; then followed by whether the benefit is taxable on the director (or satisfies the requirement of an exemption).

Where we parted company was (as I suggested in an earlier response) in arriving at different assumptions regarding whether the training related to the employee’s current employment or related employment.

I'll admit I was looking at this aspect in terms of normal employment contracts (which usually define to some degree the job role, so a complete change *might* constitute a new contract - especially if the new role hasn't in fact actually been defined, which sounds likely).
I hadn't considered your point that it might all fall under the broader terms of the role of a Director ... although I'm not convinced that highly specialist training is necessary to perform the "steering the ship" duties of that role - the captain and the stoker being different roles, to continue the analogy.

But as I said originally, we know next to nothing of relevance of the details (even what the "Really specialised engineering" will enable the company to consider branching out into from its core care business).

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Replying to Hugo Fair:
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By Tax Dragon
17th Dec 2021 10:19

Hugo, we were told the "training was done to enable the start of a new specialised profession/business", the "Director genuinely believed she could use the same company for both types of work" (that the "Company was diversifying") and that, months later, the "director decided a separate company would be better, so one has been incorporated."

We know that the benefit of work-related training is exempt (s250). And s251 defines 'work-related training'. If only people would look, we could all be on the same page (or its digital equivalent). [The number of tax discussions that happen in this forum without anyone actually looking up the rules beggars belief. I know it's my day job to look up the rules, so it's second nature to me; and I appreciate your average accountant is a little more trepidatious about opening the red/yellow/other book, or a digital equivalent; and I get that often they make a pig's ear of reading it. But at least look. Sometimes, as in this case, it's a really easy read.]

Side-tracked, sorry… where were we? Oh yes… I think Dulls is proposing simply that, when the training was provided, it met the definition/conditions in s251 because, at the time (ie forgetting that, months later, there was a change of plan), it was likely that the skills would prove useful to the employee when performing her duties, as it was likely that her duties would come to include doing some really specialised engineering.

I think Dulls is right.

But it doesn't hurt (and this addresses Nick's "scuppers" point - someone else not looking at the rules) that 'related employment' (s251(2)) includes an employment with a person connected with the employer, which the employee is to hold. (Regurgitated in EIM01230 - all you had to do was turn a page.) It seems to me that either the training was for the current employment (because there was no notion at the time of another company) or it was for a related employment as defined (because it was always going to be for another company). So at Tribunal I would be leading with Dulls's argument but also presenting an "alternatively...".

(Postscript: In interpreting the legislation, a Tribunal would consider whether the connected person had to exist at the time of the training. But that seems to me the only 'technical' point here. IMHO the forum exists to discuss points like that, and it is for the professional OP to apply the rules as discussed to the case in question; but all too often respondents instead want to discuss rules less than they want to discuss the case itself. Frankly, I have no interest in what the "really specialised engineering" is, nor how the client plans to monetise it. It's not relevant to us; let's stick to discussing tax law on tax questions.)

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Replying to Tax Dragon:
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By Hugo Fair
17th Dec 2021 13:35

Whilst all your central points are, as always, both correct and to the point (and I'll hold my hand up to most of the accusations of failing to stick to interpretation of the actual legislation) ... I was *trying* to get at something I still feel is relevant.

The work at the heart of the s251 definition of 'work-related training' is not in itself defined ... in that I would expect a Tribunal to ask to see any documentation about the work required by the specific job role (per Employment Contract and associated T&Cs).
If I'm wrong on that (or you simply disagree), then fine.
But if not, the blurring often encountered between the role of the Director and the role of the same person as an Employee might become pertinent here?

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Replying to Hugo Fair:
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By Tax Dragon
17th Dec 2021 14:24

Let's assume a fact: the woman in question is now, today, doing really specialised engineering work as part of her duties. [Assumption made for discussion purposes only. The s251 test might be met even if she's not. But, to make the point, let's assume she is.]

The 'likely' test in s251(1) - hasn't Dulls already said this? - is whether the knowledge etc is likely to prove useful to the employee when performing the duties of the employment. In your view, making our assumption, is the test met?

If so, the course was 'work-related training'. That's what s251(1) tells us. It doesn't matter if

Hugo Fair wrote:

The work at the heart of the s251 definition of 'work-related training' is not in itself defined ...

Tax Dragon wrote:

s251 defines 'work-related training'. If only people would look, we could all be on the same page (or its digital equivalent). [...at least look...]

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Replying to Tax Dragon:
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By Hugo Fair
17th Dec 2021 18:53

OK, if we're going to start from a basis of assumptions ... how about:
* the woman in question is now, today, NOT doing really specialised engineering work as part of her duties (she is a director of a care home, say);
* she then has a bright idea that there's a gap in the market (a different market) for controlled removal of asbestos-contaminated materials - and chooses to go on an expensive training course to make her qualified in that new market;
* in the meantime the company (even if it is her company) has no plans for how to enter that new market let alone a plan to recover the investment in training.

My point was (and remains) that an Employment Contract usually contains (or has appended to it) some sort of job description (JD) for the role for which the person is being employed.
A director who is also an employee (not always the case) should have distinct JDs for each role - but in their absence a Tribunal will often assign 'typical' roles based on what the person has been doing.
Whether via written JDs or imputed ones, I can't see how either would encompass the need for the employee to be able to handle controlled removal of asbestos-contaminated materials ... if there isn't a new JD, or at the very least a business plan for this new market (demonstrating the need to acquire the relevant skills).

I don't think I'm saying anything particularly different to my previous posts - and I'm obviously not convincing you of the possibility that a JD is relevant in the context of whether training is 'work-related' - so I guess sanity suggests leaving it there and finding another topic on which to agree/disagree as appropriate!

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Replying to Hugo Fair:
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By Tax Dragon
17th Dec 2021 20:11

I would see what you are saying as wrapped up in the assessment of the likelihood of the individual (in your example) handling controlled removal of asbestos-contaminated materials. So... you're not wrong, other than in seeing it as a need to sub-define 'work'. (I think the statute is far simpler than you are trying to make it.)

Btw if it's not her company, then the other employment probably isn't related, so it's then Dulls's argument or bust.

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Replying to Tax Dragon:
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By Hugo Fair
17th Dec 2021 21:20

Phew, I'm glad to see that my hard-earned reputation for taking something simple and finding undiscovered complexity within it (if only in my eyes) is not at risk!

Anyway, hope you have a wonderful festive break - with (at least some) nights of uninterrupted rest. I look forward to some more jousting (possibly an insensitive concept to a dragon) in the New Year.

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Replying to Hugo Fair:
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By Tax Dragon
17th Dec 2021 22:23

Hugo Fair wrote:

(if only in my eyes)

I quite like the concept of a reputation that exists only in the eyes of the person whose reputation it is; it's even better that such a reputation should be hard-earned!

For some reason, I thought you preferred mathematical simplicity to convolution.

Here's a little game. Do a find-and-replace on Ss250 and 251. Find 'work-related' and replace with... well, replace with any word, phrase, number, symbol or invention of your choosing. The change will have zero impact on the meaning of the sections.

I sometimes wish legislators would do just that - make up a word, rather than using an existing one and giving it a specific, non-dictionary definition. It would avoid people using an existing definition when they read it, which is basically what happened in the first half of this thread.

Good Christmas back at you.

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Replying to Tax Dragon:
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By Hugo Fair
17th Dec 2021 23:51

I was intrigued and impressed with your suggested little game ... until I tried it (by replacing 'work-related' with 'Tax Dragon' throughout ss250 + 251).
The result was a tonic for my sense of humour, but may not have aided clarification - especially as I'm not sure now whether the training is for, by or of a Tax Dragon!
I'm off to wrestle with my inner turmoil (mathematical simplicity and convolution for its own sake have their equal but contradictory charms, but not just before bed).

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Replying to Hugo Fair:
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By Tax Dragon
18th Dec 2021 06:52

How to Train Your Tax Dragon 4: Get it to Read the VAT Act.

But what a perfect demonstration of the point. 'Tax Dragon training' means precisely what modified s251 says it means. But because the words already have a meaning for you, you find yourself drawn away from the statutory definition of the phrase and you find yourself wondering "is that for, by or of?" No, no, no - it's none of those things.

(Unless of course Tax Dragon happened for example to be providing or undergoing 'Tax Dragon training', as defined.)

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Replying to Tax Dragon:
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By Tax Dragon
18th Dec 2021 07:14

"(Unless of course Tax Dragon happened for example to be providing or undergoing 'Tax Dragon training', as defined.)"

Or you are using the phrase 'Tax Dragon training' outwith the context of modified s250. The specific definition applies only within that context (and any other statutory rule that expressly imports the definition). Elswhere... could be for, by or of, I guess.

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