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Cost of training is usually exempt when it is work related.

Exempted training cost

Work-related training is the one you acquire to help you to improve or update the skills you have already acquired

Misconceptions about training cost

The most common misconceptions are that all cost can be deducted as an expense.

However, some training is disallowed as an expense if it’s not work related.

There are also tax consequences when an employer provides its staff with non-work related training.

Non-exempt training cost

The main issue here is when some training has a capital nature.

Training has a capital nature when an individual acquires a new skill they will use it for a long time.

For example, acquiring a degree or master’s degree.

When an employer provides the training

If this training is exempt from tax, they can deduct this expense from their profit before tax deducted.

However when they provide non-tax exempt training i.e. not work-related or acquiring a new skill.

Compliance issues with providing training to the employee.

If the employer has arranged and paid for this training, they would report the cost on P11d form .

The employer will also pay the Class 1A national at 13.8% to HMRC.

If the employer reimburses the employer for non-exempt training he has paid for.

The employer will have to add this cost to his other earnings and deduct tax and also deduct national insurance from the employee. This would be deducted through PAYE.

They will then be able to deduct these expenses from their accounts at their yearend.

Cost to be deducted as training cost

The cost that can be deducted is the cost of training and other related costs such as course materials and travel expenses.

What to do when paying for Training.

The most tax efficient way for an employer providing non exempted training is to ensure they arrange and pay for the training rather than the employer.

If however, you decide that you do not want a long term partnership, we also offer services in which our Northampton accounntants can teach members of your company everything they need to know about taxes.

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