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Tax relief on training costs

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Employees who pay for their own training may seek a tax deduction for those costs, but that is not normally permissible, as Jane Wanless explains.   

28th Jan 2022
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The issue of tax relief on training expenditure incurred by individuals arises particularly in the case of airline pilots, when the training costs are not insignificant. Training costs may also arise with many other forms of employment. 
Training costs are generally met by the employer.

Exemption from tax for the employee is provided by s250 ITEPA 2003, which covers the cost of work-related training and incidental costs, whether the employer incurs the expenditure directly or reimburses the employee’s expenditure. To qualify for relief under s250, the training must be on the provision of “work-related training” or “related costs”.

What is work-related training?

Work-related training includes “any training course or other activity” designed to provide, improve or reinforce any knowledge, skills, or personal qualities that are, or are likely to be, useful to the employee when performing their duties or to participate in charitable or voluntary activities arising through the employment.

Courses providing updates such as continuing professional development are (thankfully!) clearly allowed on the basis that they provide the up-to-date knowledge needed on a day-to-day basis. However, training does not have to be directly linked to the work that the employee usually carries out. Training in order to become the office first aider, team-building, and employee development schemes will also qualify for relief.

How must training be delivered?

There is no restriction on the way the training can be delivered so self-tuition packages, computer-based training, and distance learning all qualify, as well as more formal classroom-based training. It does not matter whether training is delivered internally or externally, or on a part-time or full-time basis, and there is no territorial limitation on training location.

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Replies (4)

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By Hugo Fair
28th Jan 2022 20:11

All correct - but wholly unsurprising, since nothing in this area has changed?

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By Ajtms
31st Jan 2022 11:49

What I can never get a definitive answer on is in situations where a contract of employment states that if the employee hands in their notice within 3 years of starting, they have to reimburse the employer for CPD training costs. I don't see why "Salary Sacrifice" can't be used as surely then the training costs technically fall back on the employer. Has anyone had any experience of these contracts which seem increasingly commonplace?

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Replying to Ajtms:
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By Hugo Fair
31st Jan 2022 18:23

You'll have to explain in a bit more detail how you see Sal Sac helping if you want a serious critique ... but:
* Sal Sac is a reduction in contractual salary (not just a deduction from it) and cannot be implemented retrospectively;
* If Sal Sac was used (at the time) for provision of external Training courses, then that means the employee is 'paying' for the courses (not the employer);
* If the EE subsequently leaves then he/she has still paid for the courses.

The contracts which you say "seem increasingly commonplace" have been fairly standard for over 40 years - particularly within professional services firms.
The employer pays (because they hope to have a more qualified member of staff without the rigmarole & uncertainty of recruiting externally) - but has no wish to then find the now more valuable employee promptly leaving for pastures new.
So it's common to have a clawback term (enabling the costs to be deducted from earnings or by other means) if the employee leaves within a specified duration of the training course end.

How does Sal Sac fit in with any of this?

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By matchmade
31st Jan 2022 14:04

HMRC is as ever being totally unimaginative and is doing absolutely nothing to encourage adult education in-career or to retrain into a new sector. The UK is terribly short of IT workers, STEM teachers, medics, construction workers, you name it, but government and the big companies is largely only interested in education for young people.

I had to laugh hollowly too at this notion of an employer ever paying for training. My wife works as a speech pathologist for the NHS and she's only been reimbursed for perhaps one in 10 of the training courses she's undertaken over the years to improve her skillset. The NHS is perfectly happy to instruct her to undertake new duties using her improved skills she's paid for from her own pocket, but resolutely refuses to pay a penny towards the training, and of course there's no chance of extra salary or enhanced career prospects within the organisation. And they wonder why they find it so hard to recruit and retain staff!

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