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Tax treatment of training costs

Change of company's business from IT to Garden Design

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Small ltd company (IT Contractor) is ceasing this activity and moving into the Garden design market. The sole director asks if the costs of a training course (approx £1,400) is allowable for tax and/or would it be a taxable benefit.

 

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By Moonbeam
12th Nov 2019 13:57

If it's training on garden design then not allowable.

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By Moonbeam
12th Nov 2019 15:51

It seems I was wrong.

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By Tax Dragon
12th Nov 2019 16:54

Moon up a bit.

Wolfie's only given the s250 link, which protects the employee from a tax charge. This doesn't speak to allowability. Expenditure that puts you in a position to trade is, as a rule, capital - therefore outwith the provisions DJKL referred to in s61 CTA2009.

Or were you looking at something else?

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By The Dullard
12th Nov 2019 17:06

Training officers and employees and providing them with benefits is, as a rule, not capital.

For it to be capital there ought to be an asset of enduring benefit created. Not some dumb @r5e that can now turn a garden off and switch it back on again, who might fuch off at any given moment.

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By Tax Dragon
12th Nov 2019 17:24

In this case, the director would have to return the knowledge if he left.

I've seen the contract.

Oh, there's also a two-year notice period.

I jest of course (I never claimed to be funny)… but I do wonder why the as a rule you cite trumps the one I cite. To me the logic points the other way - no expense, no trade.

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By The Dullard
12th Nov 2019 18:14

If the company wants to start doing gardening, but didn't train the existing employee, they could just employ somebody else. It might need to offer a golden hello for inducement, which is a revenue expense.

But here's an idea. Tom's an IT man, operating through a limited company, but the IT market is flooded. Tom hankers to do gardening. Tom is going to start doing gardening through a new limited company.

Immediately before ceasing it's IT trade, company 1 pays for Tom to retrain as a gardener, so that he can go and work for company 2. Company 1 can claim relief for its expenditure under s 74 CTA 2009.

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By Tax Dragon
13th Nov 2019 10:39

Seems like a lot of effort for tax relief on £1,400.

If it was me, I think I'd be tempted to keep the company and claim the deduction (as an expense of trade 2).

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By The Dullard
13th Nov 2019 10:43

Personally, I'd be happy with that treatment too. It was just that you seemed to have your doubts.

PS No comment on the rogue apostrophe?

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By Tax Dragon
13th Nov 2019 13:01

I am trained to doubt - or at least question - everything. Trouble is, I doubt I'm good enough to answer the questions.

The Dullard wrote:

PS No comment on the rogue apostrophe?

That's more my level.

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By The Dullard
12th Nov 2019 14:01

Yes. Allowable, and no benefit in kind for the director, as it would fall within the work-related training exemption.

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Lone Wolf
By Lone_Wolf
12th Nov 2019 14:35

Two answers. Each on opposite sides of the divide. Which one will you side with...

I'd go with The Dullard - have a read though this guidance and see what you think: https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim01200

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Hallerud at Easter
By DJKL
12th Nov 2019 14:55

I think , like comedy, timing will be everything ,though only on point if there is going to be a seven year or more gap between one trade ceasing and the other starting, as they sort of sound like they will overlap this seems not to be an issue, so I go with allowable.

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By Accountant A
12th Nov 2019 15:18

What has the Small ltd company's accountant discovered in the course of his/her research on the matter?

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Hallerud at Easter
By DJKL
12th Nov 2019 17:46

This could be one thread that is really informative so methinks it ought to be encouraged, depending upon outcome I could always tap my employers about sending me on a lion taming course.

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By Accountant A
13th Nov 2019 17:41

DJKL wrote:

This could be one thread that is really informative so methinks it ought to be encouraged, depending upon outcome I could always tap my employers about sending me on a lion taming course.

It is interesting every time it is discussed on here - which is quite often - but the answer is the same. If there's one thing worse than a "professional" adviser who puts zero effort into advice he is charging his client for before asking someone on here to do his/her homework, it's someone who can't be @rsed to search the site using the search function or via Google.

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By whitevanman
12th Nov 2019 17:41

Surely the point here is that it is a company, not a sole trader. It is for the company to decide what it pays to or for it's employees and unlikely that HMRC (or anyone) can argue that such costs have not been incurred for the purposes of their business. The real question is whether a benefit charge would then arise to the employee. Whilst the answer would be "Yes" it would probably be exempt as employment related training (see HMRC manual EIM01220 and 01230).

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By Tax Dragon
13th Nov 2019 10:45

whitevanman wrote:

...been incurred for the purposes of their business.

What test/comment is this referring to? I was wondering aloud whether the cost was capital. (I take The Dullard's point about enduring benefit, and that such must 'belong' to the company.) No-one's suggested the cost isn't for the purpose of the business, or trade.

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By The Dullard
13th Nov 2019 10:55

On a wholly technical level, that is the point though.

I personally don't accept HMRC's argument that it is capital.

In a non-corporate situation there is no enduring asset in the business; it is the proprietor of the business that has been improved to the point of being able to carry on the business in the first instance.

And that is not a cost of the business; it is a personal cost of the proprietor, who can then carry on the business in consequence of the expenditure.

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By Tax Dragon
13th Nov 2019 13:01

In that context, I now understand your previous comment.

I think your analysis (the proprietorial expense being personal) makes much more sense than saying it's capital. I thought case law agreed with you, but Dass doesn't… the judge there said it was "clearly correct" to treat the expense as capital.

Companies don't tend to have personal expenses (as was your point). They do have capital ones. So Dass seems to sow a seed of doubt in relation to companies when, as you (and the Dullard) point out, there should not be any.

Having bad case law doesn't help anyone. Now my memory is returning, and IIRC, other contributor(s) have made that very point (in relation to Dass) in other threads.

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By Tax Dragon
13th Nov 2019 13:03

Sorry...just noticed you are The Dullard.

I was responding as if you were whitevanman.

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By The Dullard
13th Nov 2019 13:14

Any court or tribunal decision (including Dass, in particular) is only as good as the arguments put before the court or tribunal. Obviously, Dass is a binding precedent on any court below the High Court, but it does only have a non-corporate context, and only goes as far as putting an asset in the business in a soletrader situation (where the divide between owning the business and being employed in the business is much less distinct). IMO

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