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Tax relief on University course

Qualified dentist on University course to specialise in specific type of dentistry tax deductible

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A qualified dentist wants to specialise in a particular branch of dentistry and is on a University course to fulfill this. The cost is around £20,000 per annum and lasts 3 years during which time they continue to work part time. Is this cost deductible and if so is it deductible now, or when earnings arise as a result of completing the further education course.

Would it be accepted that as having already qualified in dentistry that the University course is simply allowing the dentist to enhance their existing knowledge rather than acquiring new skills?

The original pregrad dentistry course would have included the area of specialism albeit at a basic level.

Replies would be appreciated, thanks.

 

Replies (60)

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By Tim Vane
03rd Oct 2018 18:15

My opinion would be no tax relief. The last sentence of your first paragraph probably kills it.

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By SXGuy
03rd Oct 2018 22:19

If a course is taken to better or further a skill set or income then no its not allowable.

If it were a refresher course that's different.

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Replying to SXGuy:
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By Southbankdelboy
04th Oct 2018 01:55

SXGuy wrote:

If a course is taken to better or further a skill set or income then no its not allowable.

If it were a refresher course that's different.


I'm not sure I would agree with that, we were always taught that enhancing existing skills was allowable so as long as there was an existing skill - which one could say there was in this case, then should be allowable. It appears harsh not to be allowed because the individual is foregoing significant present earnings to be able to significantly enhance future income. It seems unfair that future income will clearly generate higher tax receipts without the w&e expense attracting relief.
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Replying to Southbankdelboy:
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By Accountant A
04th Oct 2018 14:02

Southbankdelboy wrote:

... to be able to significantly enhance future income. It seems unfair that future income will clearly generate higher tax receipts without the w&e expense attracting relief.

Err, tax (and indeed life) isn't fair. You have effectively defined the expenditure as capital by saying this. A £500 refresher course is wholly different from a £60,000 3 year course. Presumably, it'll be something like dental implants he/she is learning. I don't know whether he/she can practise in this area without the £60,000 course - presumably not.

I can't see how it can be a revenue expense.

There was a similar question in the not too distant past. Worth looking that up. I think PNL might have commented which is usually worth a read.

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Replying to Accountant A:
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By Southbankdelboy
04th Oct 2018 16:32

Grey areas we understand. Rather than trying to find ways to argue that it is not allowable we would be doing the client a disservice not to fully investigate it. I would say that it would be fair to have the view that as long as the taxpayer has existing related skills, which they would have then this course could quite correctly be viewed as enhancing existing skills.
Am I being told that say a qualified accountant who has little knowledge of say acting for taxpayers with foreign income puts themselves on a series of expensive courses to learn more about the ins and outs cannot claim these costs as an allowable deduction? Where would the cut off be? It seems that we are basing the disallowance view purely on the monetary value of the course. I totally accept the significant difference between refresher courses and other courses. At what point though does it not become a revenue expense?
Right or wrong its an interesting debate

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Replying to Southbankdelboy:
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By Accountant A
04th Oct 2018 18:18

Southbankdelboy wrote:

Grey areas we understand. Rather than trying to find ways to argue that it is not allowable we would be doing the client a disservice not to fully investigate it.

Correct, and you have done that.

Southbankdelboy wrote:

I would say that it would be fair to have the view that as long as the taxpayer has existing related skills, which they would have then this course could quite correctly be viewed as enhancing existing skills.

I would say that if you are spending £60,000 and taking 3 years, you clearly don't have anywhere close to the level of current skills to argue that you are merely "refreshing" or "updating" knowledge.

Southbankdelboy wrote:

Am I being told that say a qualified accountant who has little knowledge of say acting for taxpayers with foreign income puts themselves on a series of expensive courses to learn more about the ins and outs cannot claim these costs as an allowable deduction? Where would the cut off be? It seems that we are basing the disallowance view purely on the monetary value of the course.

It's a moot point and, as you suggest, there is a "cut-off" somewhere. It's just that my view would be your client is a very long way the wrong side.

I asked earlier whether the course was a requirement (legal or professional) before your client could undertake the particular type of dental work which is the subject of the course. I don't know if you have asked your client this.

To me, that is definitely one important factor to be examined.

You said that the expenditure was being incurred "to significantly enhance future income". That seems pretty close to the standard definition of capital expenditure (specifically Atherton v British Insulated and Helsby Cables Ltd).

Monetary value and length of the course of study are, in my view, relevant as they give some indication of the 'significance' of the course to current - and future - activities. If there was a requirement for £60,000 training every year, or if it was a 3 year course costing £1,000, then, yes, it would be a better starting point for presenting as revenue expenditure.

Southbankdelboy wrote:

Right or wrong its an interesting debate

It's a very interesting debate and it's another example of the ridiculous situation that arises where otherwise identical circumstances are treated entirely differently depending whether activities are undertaken as an individual or as a company.

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Replying to Accountant A:
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By Southbankdelboy
05th Oct 2018 14:50

@ Accountant A
Thanks for your reply.
I have not asked if the outcome of the course is monetary related or not it may be just what the person wishes to do, i.e. to become a specialist in that area.
They are a sole trader.

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Replying to Southbankdelboy:
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By Accountant A
04th Oct 2018 14:54

Duplicated

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Replying to Accountant A:
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By Tax Dragon
05th Oct 2018 06:36

AA I salute you.

Very good explanation. Tbh even if the dentist once had these skills, if it takes three years to "refresh" them, that sounds like more than making good some delapidations - it's more akin to a complete rebuild.

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Replying to Tax Dragon:
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By Accountant A
05th Oct 2018 10:45

Tax Dragon wrote:

AA I salute you.

Very good explanation. Tbh even if the dentist once had these skills, if it takes three years to "refresh" them, that sounds like more than making good some delapidations - it's more akin to a complete rebuild.

Thank you

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Replying to SXGuy:
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By atleastisoundknowledgable...
04th Oct 2018 07:32

So if I (as a new owner of a Ltd who doesn’t do social media personally) take a course in social media marketing, then it’s not CT allowable? Or a course in sales? You can be damn sure that I’ll be claiming the costs.

I’m FCCA. Doing the CTA is the same logic as the dentist. Will you deny me this cost as well?

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Replying to atleastisoundknowledgable...:
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By Tax Dragon
05th Oct 2018 09:16

Once you've completed your CTA, you'll understand why the cost wasn't allowable.

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Replying to Tax Dragon:
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By Accountant A
05th Oct 2018 11:31

Tax Dragon wrote:

Once you've completed your CTA, you'll understand why the cost wasn't allowable.

And, indeed, the difference between the tax treatment of training costs for a company employee and a sole trader!

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Replying to Tax Dragon:
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By atleastisoundknowledgable...
05th Oct 2018 11:47

:) good call.

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Replying to atleastisoundknowledgable...:
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By Tax Dragon
06th Oct 2018 11:07

atleastisoundknowledgable... wrote:

:) good call.

You clearly took my meaning, but others might be less perceptive. So, conscious that t'internet (especially in forum format) crushes humour, let me just say... I wasn't belittling FCCA. Nor should CTA be belittled - and that was my point (that's why it'd be disallowed as capital, even for an FCCA).

My tease below was in similar good humour.

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Replying to Tax Dragon:
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By atleastisoundknowledgable...
06th Oct 2018 16:07

Have no fear, taken in the sense that it was meant.

“I wasn't belittling FCCA.”
#emmablyth

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By GR
03rd Oct 2018 22:39

How are they working? E.g....

PAYE? Sole trader? Personal service company?

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Replying to GR:
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By Southbankdelboy
04th Oct 2018 01:43

GR wrote:

How are they working? E.g....

PAYE? Sole trader? Personal service company?


Sole trader therefore course would have to be wholly and exclusively incurred for the business - which it is of course (no pun intended)
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By jcace
04th Oct 2018 15:35

BIM35660 gives a very clear explanation of HMRC's view:
https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim35660

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Replying to jcace:
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By Southbankdelboy
05th Oct 2018 14:43

jcace wrote:

BIM35660 gives a very clear explanation of HMRC's view:
https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim35660

From the opening section of the Manual: "Expenditure incurred by the proprietor of a business on training courses for themselves is revenue expenditure if the course merely updates existing expertise or knowledge. Expenditure on a course which provides new expertise or knowledge is capital."
It is interesting the use of the word "merely" in that it almost trivialises the degree of new information derived from the training.
So an example-an accountant decides to go on a course to learn about Charities, or Doctors accounts etc. etc. may know very little indeed before the course and a lot after it - if they didn't carry out that work before then according to the manual it would appear to be capital.

The dentist is choosing to go on the course it is not mandatory. As a side matter it would be reasonable to expect their income to be higher due to the specialism.
New expertise or knowledge would obviously be acquired but still closely linked to existing knowledge. But this would also be the case with the accountant course examples!
Safest not to claim for dentist given time frame and monetaries!

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Replying to Southbankdelboy:
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By Tax Dragon
05th Oct 2018 15:04

I think you are focussing on the wrong aspects. The clearest way of thinking about this may be that, if the knowledge/skills enabled you to do something after the training that you could not do beforehand, then it’s an “improvement” to your skills. If it “merely” enabled you to continue doing what you had done before, then it’s a “repair”.

Of course (as with any repairs and improvements), there’s a gert big sea of uncertainty – atleast will tell us s/he can do tax work now, CTA will just “refine” the skills (that’s not a debate I want to get into! :)) But I’m struggling to think of any three year course that would be anything other than capital.

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Replying to Tax Dragon:
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By atleastisoundknowledgable...
06th Oct 2018 16:01

“atleast will tell us s/he can do tax work now”

Some on here (Ruddles, PNL I especially talking to you) will say that this is incorrect and the CTA is without doubt new knowledge & capital!

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Replying to Southbankdelboy:
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By Tax Dragon
05th Oct 2018 15:14

Tim Vane's initial response was the complete answer. You have said (a few times now) that income will increase as a result of the course. Why?

Think about that together with my immediately preceding response.

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Replying to Tax Dragon:
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By Southbankdelboy
05th Oct 2018 15:42

Tax Dragon wrote:

Tim Vane's initial response was the complete answer. You have said (a few times now) that income will increase as a result of the course. Why?

Think about that together with my immediately preceding response.


Thanks for reply.
Income rising was my impression only of the outcome but that may be secondary to the ultimate reason for the course.
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Replying to Southbankdelboy:
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By Tax Dragon
05th Oct 2018 17:04

Then (unless I misunderstand what you mean – quite possible as you are confusing me with your inconsistency now) you appear to be describing a capital expense that was not incurred w&e for trade purposes. Twice disallowable. But don’t worry, you only have to add it back once.

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By Accountant A
05th Oct 2018 18:52

I'm getting really confused about the facts now.

If you are saying that the client is spending £60,000 and 3 years on a course that they don't need to do (in order to carry out work in the specialism in question) and that they then may not earn any more as a consequence, it's difficult to see how the expense is for the purposes of the trade.

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By GR
06th Oct 2018 15:00

If the dentist was working via their own company (outside of IR35) then I would say the cost of the qualification would be allowable (in the same way accountancy firms pay for their staff to do ACCA/CTA).

However as a sole trader capital expenditure (creating a new specialism that the dentist did not previously have creating an enduring benefit) would not be allowable.

As an employee trying to claim tax relief against PAYE income tax the situation of claiming a £60k qualification would almost certainly be investigated (unlike sole trader and limited company scenarios).

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By pauljohnston
08th Oct 2018 11:20

In recent budgets there was talk of allowing this kind of expense for all rather than others have pointed out for an employee. Slightly off the question, but if the Dentist became an employee of a company he owned it may then be a deduction for CT. Others who know this area better will I hope comment

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By Portia Nina Levin
08th Oct 2018 12:03

I'd try and claim it, personally.

The case law is inadequate. There is Dass, which is correctly decided but for the wrong reason.

HMRC argue, and it was accepted in Dass, that the cost was capital. In Dass it was actually not incurred wholly and exclusively for the purposes of any business, but for the purposes of the proprietor being in a position to carry on a new business undertaking.

It isn't capital. HMRC argue that there is an enduring benefit to the business, but it is the proprietor, as an employee of the business, that has been enhanced. I don't see any reason why the proprietor should be treated differently from any other employee, when determining whether the purpose is wholly and exclusively for the business. It is a revenue expense, because the employee might leave at any time. The fact that the proprietor is less likely to leave doesn't change things, in my opinion.

All that being said, HMRC are unlikely to accept that it is allowable, but that's a different issue. If it goes to tribunal they too might side with HMRC. They have got at least two travel expenses cases wrong, after all.

And as for the you'd understand why it isn't allowable if you did CTA, that's utter b0ll0x. Albeit that if atleastisoundknowledgable did do CTA, they would fall squarely within the facts in Dass.

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Replying to Portia Nina Levin:
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By Tax Dragon
08th Oct 2018 13:19

The reason that the costs are allowable for an employee is that it’s part of his or her remuneration package. Many an otherwise capital item is deductible for that reason.

You then turn to ITEPA to discover whether that means it’s taxable on the employee.

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By Portia Nina Levin
08th Oct 2018 13:58

And ITEPA demonstrates my point.

If it's purpose is to remunerate, then I concur that it creates a taxable benefit for the employee, because, being for that purpose, it falls outwith s 250, by virtue of s 253.

However, what is then clear from the legislation is that it must anticipate training frequently being provided otherwise than to remunerate.

Perhaps the employer wishes somebody working in the business to have a particular skill. In an unincorporated business, who better than the proprietor, but it ain't capital because the business does not have an asset of enduring benefit, the individual does.

Again, this is supported by your own arguments. Being remunerative only gets you past the wholly and exclusively test. If it's capital it's capital, like the company car.

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Replying to Portia Nina Levin:
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By atleastisoundknowledgable...
08th Oct 2018 18:02

Portia Nina Levin wrote:

And as for the you'd understand why it isn't allowable if you did CTA, that's utter b0ll0x. Albeit that if atleastisoundknowledgable did do CTA, they would fall squarely within the facts in Dass.

My firm is incorporated if that makes a difference ... H&W ltd structure... prob should have mentioned that a few days ago.

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By SDGREEN
08th Oct 2018 13:15

We had a dentistry client who had similar expenditure. I wasn't convinced it would be allowable but the client was happy to take the risk and willing to argue the case. We noted the details in the white space of the tax return and this was 2 years ago without any issues.

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Replying to SDGREEN:
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By Portia Nina Levin
08th Oct 2018 13:32

And this, it seems to me, is how the client is best served.

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Replying to Portia Nina Levin:
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By Tax Dragon
08th Oct 2018 15:56

Maybe.

But I'm more inclined to argue with some of your other comments:

"It is a revenue expense, because the employee might leave at any time."

What’s that logic? (Many training contracts have a payback clause, but I’m not sure that’s relevant either.)

"All that being said, HMRC are unlikely to accept that it is allowable, but that's a different issue. If it goes to tribunal they too might side with HMRC."

And in Dass, the High Court sided with the Specials.

"If it's purpose is to remunerate, then I concur that it creates a taxable benefit for the employee, because, being for that purpose, it falls outwith s 250, by virtue of s 253."

That wasn’t what I said and I don’t think I agree – though it’s wandering from the topic.

Essentially, I think to talk about the proprietor as if s/he were his/her own employee is unsupported and is intended to obfuscate/misdirect/mislead.

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Replying to Tax Dragon:
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By Portia Nina Levin
08th Oct 2018 17:40

"SELF-EMPLOYED" and SSCBA 1992, s 11 and s 122.

In Dass it was concluded that the expenditure was capital because it brought into existence an asset of enduring benefit [to the business]. That's b0110x, because the business has no such asset.

HMRC have correctly argued in the past that goodwill that relies on personal qualities/skills of the proprietor cannot be transferred on incorporation of a business, because it is an asset of the individual, rather than an asset of the business. I agree wholeheartedly. And the same applies in relation to the knowledge of the individual; it is an asset of the individual, and not an asset of the business, with the two things being distinct.

The position is nowehere near as clear cut as you suggest it is, and to simply toe HMRC's line is poor representation of the client. The client should be aware of the risks/implications of adopting a stance contrary to that of HMRC's and if they decide to adopt such a stance they should be supported.

Neither the length of the course or its cost have any bearing. Not least because they are dictated by the provider of the course, who will have a vested interested in making them lengthy to justify the amount being charged.

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Replying to Portia Nina Levin:
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By Tax Dragon
08th Oct 2018 21:25

You know, I knew that would be your punchline.

But (other than in s311 ITEPA, where the link is permitted for obvious reasons) tell me one place where self-employment is even spoken of (let alone treated) as a form of employment anywhere within tax law.

Edit1

Oh hold on - you have edited, somewhat expanding on your punchword.

Please allow me that same liberty.... but it'll have to be later, I am AFK for a while now.

Edit2

I was going to overwrite, but that might be unfair.

Is SSCBA tax law?

I think that (although you are presenting more substance to your argument(s?) now) you are still being somewhat disingenuous. HMRC does not talk about an asset; it follows case law in talking about an advantage.

In so doing, it presents an argument that is clearly correct. And that's not me speaking; it's Lightman J.

If it's bad client service to present the law as you understand it, I hope we are all guilty of it.

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Replying to Tax Dragon:
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By Portia Nina Levin
09th Oct 2018 10:32

Tax Dragon wrote:

Is SSCBA tax law?

When it deals with something that is charged on people who are liable to income tax under Part 2 of ITTOIA, I think it is.

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Replying to SDGREEN:
By Husbandofstinky
08th Oct 2018 15:58

I think you could write next weeks lottery numbers in those little boxes and no one would ever see or read it.

Very interesting thread.

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By craig__2k4
09th Oct 2018 08:50

I see HMRC are reviewing this area at the moment:

https://www.gov.uk/government/consultations/taxation-of-self-funded-work...

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Replying to craig__2k4:
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By Tax Dragon
09th Oct 2018 09:37

Maybe HMRC doesn't understand its own argument. That paper, and indeed BIM42526, talk about the creation of an asset. That's perhaps irrelevant, as Portia points out.

But there's no need for an asset to be acquired or created for expenditure to be capital. The Tax Bulletin quoted in BIM35660 states the position more correctly: "Where attendance at a course is intended to give business proprietors new expertise, knowledge or skills, which they lack, it brings into existence an advantage that is of enduring benefit to the business." The advantage, in the dentist case, is a trading advantage. Concluding that such an expense is disallowable as capital is in accordance with Case Law, as I understand it.

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By Portia Nina Levin
09th Oct 2018 10:28

No it doesn't the advantage lies with the individual who owns, and works in, the business.

I also don't know what the fuch an enduring advantage is if it isn't an asset.

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Replying to Portia Nina Levin:
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By Tax Dragon
09th Oct 2018 10:43

a) There is an advantage (we are agreed); that advantage is of enduring benefit to the business.

That's the end of the test. You are making up the rest.

b) There is an advantage (we are agreed); that advantage is of enduring benefit to the business. That's why it incurred the expense - and if it isn't then it fails the w+e test.

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Replying to Tax Dragon:
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By Portia Nina Levin
09th Oct 2018 10:56

No. The enduring advantage is not that of the business. If the business is sold, the advantage cannot be transferred with the business.

The advantage belongs to the individual employed in the business, and the business incurred the expense for the purposes of exploiting the advantage that the individual obtains.

Do you want to capitalise all the employees?

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Replying to Portia Nina Levin:
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By Tax Dragon
09th Oct 2018 11:07

But a regular dentist practice would sell the goodwill of regular dentist patients. A dentist practice with patients of more value would have more valuable goodwill.

There is an advantage to our dentist - greater sales proceeds.

There is an advantage to the ongoing business - more valuable patients.

The two are not mutually exclusive.

And you continue to play with words - the test is "of benefit to" the business - not "enduring advantage of" the business.

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Replying to Tax Dragon:
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By Portia Nina Levin
09th Oct 2018 11:23

I'm not playing with words, I'm just misrecollecting them.

For expenditure to be capital in nature, it needs to bring about an advantage of ENDURING benefit to the business (BIM35301), ie an asset.

The business does not have the advantage, the individual does, and the business can only exploit the advantage while it has access to it. That access is not enduring.

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Replying to Portia Nina Levin:
Hallerud at Easter
By DJKL
09th Oct 2018 11:22

Old style football club accounts here we come.

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Replying to DJKL:
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By Portia Nina Levin
09th Oct 2018 11:27

Football players, or rather their contracts, are something different from a regular employee. The players have a contract with a set term, and if the player wants to leave before the end of that term, a substantial payment needs to be made (usually by the acquiring club). It is the rights under the contract (including exploitation of the player's skills) that are the club's asset though.

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Replying to Tax Dragon:
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By Southbankdelboy
09th Oct 2018 11:10

Tax Dragon wrote:

Maybe HMRC doesn't understand its own argument. That paper, and indeed BIM42526, talk about the creation of an asset. That's perhaps irrelevant, as Portia points out.

But there's no need for an asset to be acquired or created for expenditure to be capital. The Tax Bulletin quoted in BIM35660 states the position more correctly: "Where attendance at a course is intended to give business proprietors new expertise, knowledge or skills, which they lack, it brings into existence an advantage that is of enduring benefit to the business." The advantage, in the dentist case, is a trading advantage. Concluding that such an expense is disallowable as capital is in accordance with Case Law, as I understand it.


I think it is reasonable to say that any Lawyer, accountant, dentist, architect or other professional you care to mention attend courses because they feel they "lack" knowledge or want to build on skills they already possess. To say they are not allowable as a revenue expense is surely incorrect. In general, there would always be new knowledge OR expertise OR skills as a result of the course.
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Replying to Southbankdelboy:
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By Portia Nina Levin
09th Oct 2018 11:36

[irony]You're not listening. It says it in an HMRC Tax Bulletin, and a judge has (incorrectly) said it in a case where the facts were very different. Your client spent £60K and it took three years, so it must be capital.[/irony]

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