Training costs tax relief in a Limited Company
It is so often the case when you start up a Limited Company that you may not have all the necessary skills to run a company therefore many directors seek to obtain training in order to enhance their skills and hopefully succeed in running a successful company.
We will often get asked “Will I get tax relief on training costs for my new company?”
The answer is …..
Where a limited company provides training to officers and/or employee Corporation Tax Relief is generally available as long as the expenditure meets the basic requirement of being wholly and exclusively for the purpose of the trade. In most cases, the company will be providing training so employees can better perform their duties in the trade or to advance the companies trade and a deduction will be available.
HMRC consider trade purpose and the revenue nature of training expenditure in the Business Income Manual BIM47080.
What if the training is not work related?
Employees (including officers) are subject to income tax on the benefit received under ITEPA 2003.
Exemptions for income tax and national insurance are available for ‘work-related’ training. The term is self-explanatory, but the strict definition of work-related is provided in the Employment Income Manual EIM01220.
Where the training is not work-related, for example, a company manufacturing widgets sending its Finance Director on a candle making course, it is not work related and is therefore a taxable benefit in kind for the director. The benefit is reportable on the director’s p11d.
The cost of the candle making course is, however, a deductible expense for corporation tax purposes, as it is part of the Finance Director’s remuneration package, and their employment is wholly and exclusively for the purpose of the company trade.
This guidance does not apply to sole traders or partnership businesses.
If you are starting up a limited company and need help with your company accounts and finances then get in touch. Our team of expert accountants are here to help
