Pre-trading expenditure om training course

roplabda

Hello!

I am just about to move from being an employee to be a self-employed (from 6 April 2009) IT engineer and analyst. About three years ago I started doing an on-line IT course consisting of 3 modules. I have had other IT qualifications from abroad but these were not recognised in the UK so I started this course to firstly update and maintain my knowledge with UK qualifications (A+ and N+) and to gain new knowledge (CCNA) built on these. A+ and N+ are definitely relevant to my current business and CCNA will be useful in the future when I qualify.

In previous threads and other forums I read that training courses to gain new skills and that lead to qualifications would count as a capital rather than revenue expenditure, however to maintain skills it's deductible as revenue expenditure. I'm not sure where I stand now with my qualifications and whether these are deductible as pre-trading expenditure. Could anyone please give me advice on this matter?

If it counts as capital is that as capital expenditure in the P&L and I may claim capital allowances or as capital in balance sheet? Also if p&l item can I claim AIAs on it as it would count as if incurred on first day of trade or would go into the main plant pool - this sounds strange to have training course as plant though...?

Thank you for your advice in advance!

Curveygirl

Well I'm not an expert by any means so don't take anything I say as read, but I have asked the tax office this qu myself (on behalf of another), and it also came up on a tax return course run by them, so hopefully my answer will fit:

I asked whether the course my friend had been on (in order to gain the skills he needed to become S/E) could be deducted. The answer was NO (ie not as capital expenditure either). Someone on the course suggested that people should register as S/E BEFORE going on the course, but the answer was still NO. It you are already trading, and the course, UPGRADES your skills that s different, but not if the purpose of the course is to make you "fit for trade".

Although you say its relevant for your current business (and therefore sounds like an upgrade of skills), I am assuming you mean as an employee.

Whichever way i turn it, I don't THINK it works, but as I said, I know nothing. Your best bet it is to speak to a small business advisor as your local Tax Office (its free) and get it from the horses mouth.

roplabda

Thanks for your reply Curveygirl. I think I will stay on the safe side then and won't include it when it comes to the return.

Can I have just two more questions?

1. If you've done the tax return course, do you by chance know if Class 2 and 4 NIC is deductible expense on the return? As I know both tax and NIC is based on the gross salary for employees but companies can deduct ER's NIC from their profits when they calculate PCTCT.

2. When including expenses, do I include them at cost+VAT or net of VAT given that I will not be VAT-registered?

Thanks a lot!

fengirl_2

1. No, these are presonal expenses. A company is different as it is an employer and on costs for employees are part of the company's liabilities.
2. You include the VAT on all purchases as you are not reclaiming it.
I concur with Curveygirl - the cost of your training course is personal and not a business expense.

roplabda

Thank you fengirl. Your reply is much appreciated and it does make sence