What training expenses can I claim through my limited company?

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What training expenses can I claim through my limited company?
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What training expenses can I claim through my limited company?

As a contractor, training is vitally important. It helps you hone your skills and allows you to source new contract work. But did you know that you can claim training back through the tax bill of your limited company? Find out what training you can claim in our article.

 

What type of training is a genuine company expense?

As long as the training you receive is directly associated with your current trade, you can claim it as a legitimate business expense by your company.

The key rule to follow is to ask yourself: is there a tangible benefit to your company as a result of this training? HMRC’s general guidance explains that any expenses must be incurred wholly and exclusively for the purposes of the business.

Keep this in mind, then you can’t go far wrong.

 

Who can receive training?

Generally, it’s advisable to follow the same principles for training costs for both directors and employees. As a director, you likely have control over what training costs are paid for by the company. This gives a little more flexibility in the type of training that can be claimed. Alongside enhancing the skills that directly apply to your trade, you can also consider management skills and soft skills that will also add value to the business.

There is no reason why these other areas cannot also be made available to all employees if there is a direct benefit to the business.

 

Can I claim for training overseas?

There may be times when an opportunity arises to undertake an overseas training course. You can absolutely claim these costs, but you must ensure that the expense can be deductible against your company’s Corporation Tax bill. This means you need to prove to HMRC that there was no personal element to the overseas trip.

Aeroplane in the sky jetting off overseas

As much as it may appeal to incorporate a fun holiday element into the trip alongside the training, you cannot claim it as an expense. For an expense to receive tax relief, it needs to have been incurred wholly and exclusively for the purposes of the business. You must be able to prove to HMRC that there was no personal element to the whole overseas trip.

 

Is training a revenue or capital expense?

Training is usually a revenue expense and is shown on the profit and loss account. Revenue expenses gain Corporation Tax relief in the same year that the expense is incurred.

However, in some circumstances it may be classified as capital expenditure. This is where expenditure on training results in a new expertise and is of enduring benefit to the business.

 

What if my client pays for my training?

If possible, try to avoid your client paying for training. A client paying for your training is likely to weaken your IR35 position.

A contractor genuinely in business on his/her own account bears the costs of training themselves. It’s typically only traditional employees that should expect their training costs to be covered by employers.

 

Seek expert advice

Training courses can vary greatly in price – and could even run into the thousands of pounds. Before signing up for any training, we strongly recommend you discuss any significant potential expenditure with your accountant first.

As part of any Taxevo accountancy package, your accountant will be able to check whether or not the spending can be offset against your company’s tax bill. For more information, click here or call 01962790237.

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