Tax Relief on Professional Development Training

angelavdavis

I have been studying for the last four years for an MBA with the Open University Business School.

I spent the first two years completing the undergraduate course, have completed 12 months of my MBA and just about to embark on the final year.

The total cost is about £18k.

A friend mentioned to me that they thought I was entitled to claim tax relief on the professional education. I was not aware of this and can't find anything on the web about it.

Does anyone have any idea if this information is correct? I have been studying part time (in my own time) and have been working full-time throughout the period.

Thanks in advance

Angela

jw0719

As I understand it, any costs allowable as income tax deductions would have to be wholly, exclusively and necessarily for the course of your employment.

The cost of your MBA is highly unlikely to meet these three criteria, so no, I'm afraid not.

Cook_County

HMRC do not take the view it is deductible, but you do not have to agree with them if you can argue as jw0719 states that the expense was "wholly, exclusively and necessarily for the course of your employment."

ctm_2

It dhould actualy be wholly, exclusively and necessarially incurred in the course of your employment, not for your employment, which narrows down the things that you can claim releif on a lot.

HMRC will say that doing this course is not something required for you to do your job (otherwise your employer would have paid for it), and the expense is not incurrec whilst performing the duties of your employment. The expens is incurred by yourself to help further your career. Even if it was incurrec in the duties of your employment HMRC would say that for relief to be given it would have to be an expense incurred by all holders of that particular post.

Basically, you won't get any tax relief on it.

angelavdavis

Somehow I thought I might be too good to be true!!

Thanks

StratApproach

I've also done (finished an MBA) awaiting assessment of my dissertation.

MBA's a big no no with the taxman. tried myself, in fact paying back some tax because of advice from second accountant.

So no you can't claim. Because it relates to a qualification.

Good luck with the course - It's taken me five years in all. Don't know what to do with the spare time now.

Cook_County

Just because HMRC say something, this does not make them correct always.

According to HMRC:

1. a self-employed individual cannot deduct any of the costs in computing income for tax purposes, because of the wholly exclusively and necessarily rule.

2. an employed person is taxed on the benefit if paid for by an employer.

3. an employer can get a deduction in calculating its profits.

Consequently, if one is self-employed, a better answer could be obtained by changing the buiness into a limited company because the company would get a deduction.

I do not agree however with HMRCs premise. I think it weak in law. If a self-employed person went on a 2 day training course to improve knowledge of Excel then this woul be deductible providing the expense was not capital. I do not see whjy the length of cost of an MBA should be any different, providing the self-employed business already exists.

ctm_2

Cook_County wrote:

1. a self-employed individual cannot deduct any of the costs in computing income for tax purposes, because of the wholly exclusively and necessarily rule.

The self employed only have to satisfy the wholly and exclusively parts, not the necessarily part. This is how they can claim so much more.

HMRC's viewpoint is that if it is necessary for the employment, then the employer will pay it. Obviously this isn't the case for those who are self employeed as they have no employer.

paulus

Whilst it is difficult for an employee to satisfy a tax relief claim for training costs met by the employee himself, such costs can often be met by an employer without creating a taxable benefit. The exemption for "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".
If the MBA satisfies this, the answer would be to see if the employer would meet the MBA costs and for you to sacrifice a corresponding amount of taxable salary. As well as saving you the tax the employer would also save on NICs.

angelavdavis

StratApproach wrote:

I've also done (finished an MBA) awaiting assessment of my dissertation.

MBA's a big no no with the taxman. tried myself, in fact paying back some tax because of advice from second accountant.

So no you can't claim. Because it relates to a qualification.

Good luck with the course - It's taken me five years in all. Don't know what to do with the spare time now.

Just starting my final year myself (4 years in) - I have doubled up on my last 6 month module + 12 month. Like you (I am guessing), I had to do the undergrad - hence it taking so long.

Its been a slog but the thought I might get finished in 2007 is reassuring. Got my exam this Friday for the current module so wish me luck!!!!

Fingers crossed on your dissertation!!!

angelavdavis

paulus wrote:

Whilst it is difficult for an employee to satisfy a tax relief claim for training costs met by the employee himself, such costs can often be met by an employer without creating a taxable benefit. The exemption for "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".
If the MBA satisfies this, the answer would be to see if the employer would meet the MBA costs and for you to sacrifice a corresponding amount of taxable salary. As well as saving you the tax the employer would also save on NICs.

That is if you have a decent enough employer that will sponsor you - wasn't my case, they just made the most of my learning, kept me hanging on over 2 years for a promised regrade while I carried another manager's operational responsibilities and told me it wasn't policy to support MBAs!

I have just finished up with them (thank goodness) and have been offered a job earning 3 x the previous salary (contract initially at my request to help with the financial issues but they have offered me perm with +£20k payrise from January).

I have had it with useless employers. Good riddance I say!!!!