As business owners, training and upskilling are essential for staff development, staff retention and personal growth. With the added benefit of ensuring your customers get the best possible service with highly trained staff.

Can I claim tax relief on training employees?

Whether a sole trader, partnership or limited company, the costs a business owner incurs on training courses are usually classed as business expenses. So, to answer the question are training courses tax deductible, then yes. Training is normally fully tax deductible from the business’ trading profits; thereby generating income or corporation tax relief. They are a revenue expense.

The fundamental principle is whether the expenditure on training courses has been incurred ‘wholly and exclusively’ for the purposes of the business in question.

This is the case whether the training courses are:

• Updating the individual’s existing skills and knowledge; or
• Developing new skills and knowledge for the individual.

The deductible training cost includes any related training materials as well as travel and subsistence costs.

Leadership and softer skills training for Directors is also captured.

Does the type of training course make a difference?

The good new is that the nature of the training course, whether online courses or in person, whether leading to a qualification or not, does not affect the availability of training tax relief.

Does training lead to a Benefit in Kind for employees?

‘Work-related training’ that is provided by an employer to an employee does not give rise to a taxable benefit-in-kind. This means that the employee does not need to pay PAYE tax on the value of the training and the employer does not need to pay Class 1A National Insurance Contributions (NICs).

‘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.

For the ‘work-related training’ exemption to apply, the training must relate to the employee’s current employment or to a related employment.

There is no restriction on the way the training can be delivered. Self-tuition packages, online or distance learning, work experience or work placement and informal teach-ins are all acceptable as are more formal classroom based methods. It does not matter whether training is delivered internally or externally, or on a part-time or full-time basis.

What can an individual claim if their employer doesn’t pay for their training?

Tax relief for employment related expenses can be quite difficult. This is because relief is only given where the expenses are incurred wholly, exclusively and necessarily in the performance of the duties of your employment.

As such, tax relief cannot usually be claimed for training courses funded privately. This is so even where the subject of the education is closely relevant to the nature of the employment. The expenses cannot be relieved for tax purposes because they are not considered to be incurred in the performance of the duties of your employment.

Where possible, it is always preferable for an employee and employer to agree on a fair programme of training to be provided as part of the employee’s remuneration package

What tax relief is available for business owners?

For self employed sole traders and individuals in partnership with others, provided the training activity is:

• undertaken wholly and exclusively for the purposes of the trade carried on by you,
• with the purpose of up-dating your skills and professional expertise,

Be aware of training courses that invoice learning a new specialism or skill as these are not considered to be “wholly and exclusively” for the existing trade.

For example, an accountant staying up to date with tax legislation would be considered a cost incurred wholly and exclusively for tax purposes

If you are ever unsure, always check with your advisor.