Training expenses through Ltd Company ?

coffeehound

I'm considering taking a full-time course from this September to April 2018 which would cost around £6.5k in fees with living expenses on top.

I'm currently working in a contract via umbrella services co with around £900 gross per week earnings.

Is there any advantage in running earnings from now until then, and then the training costs and expenses, through a Ltd Company?

Thanks

00ec25

it TOTALLY depends on the nature of the course:
- Will it lead to you acquiring new "knowledge"
OR
will it be your maintaining existing knowledge / qualification(s)

coffeehound

Thanks 00ec25, good to know and a difficult question. A previous course was supposedly higher academic level but did not included sufficient skills for employment. This course would provide the missing skills and therefore I would argue that it would furnish 'new knowledge.'

ThemeOne

I imagine you're asking as there's no chance of putting the course through as expenses via the umbrella co?

If I were in your shoes I would probably ditch the umbrella company and put everything through my own Ltd co from now on.

But then again there could be reasons why you're using the umbrella company that I'm not aware of.

TheCyclingProgrammer

coffeehound wrote: »

Thanks 00ec25, good to know and a difficult question. A previous course was supposedly higher academic level but did not included sufficient skills for employment. This course would provide the missing skills and therefore I would argue that it would furnish 'new knowledge.'

Training in new skills to put you in the position to do your job is not a tax deductible expense.

coffeehound

ThemeOne wrote: »

I imagine you're asking as there's no chance of putting the course through as expenses via the umbrella co?

If I were in your shoes I would probably ditch the umbrella company and put everything through my own Ltd co from now on.

But then again there could be reasons why you're using the umbrella company that I'm not aware of.

Thanks. Is it worth doing Ltd co. even with just three months' income to come in this FY? Wish I'd done that from the start but the contract wasn't expected to run this long.

TheCyclingProgrammer wrote: »

Training in new skills to put you in the position to do your job is not a tax deductible expense.

It would be for obtaining a different job from the one I'm doing now, so from previous posts that should be okay?

ThemeOne

coffeehound wrote: »

Thanks. Is it worth doing Ltd co. even with just three months' income to come in this FY? Wish I'd done that from the start but the contract wasn't expected to run this long.

Up to you really. The plus side of an umbrella co is you don't really have to worry about anything, so they're ideal if you're just contracting for a short period, or for people seriously phobic about anything money / accountancy related.

If you think you'll be working like this for longer and/or may do so again in the future, I think it's worth getting your own company - you can fairly easily find out how to keep the accounts and make tax returns yourself as an accountant is usually not necessary from a legal point of view.

coffeehound wrote: »

It would be for obtaining a different job from the one I'm doing now, so from previous posts that should be okay?

From a brief bit of googling earlier it looks like there *might* be ways to claim it as an expense but I'd advise care and caution as it's a relatively large expense which might trigger a check by HMRC - though we're always hearing how under-resourced they are, so in reality who knows what the triggers are.

coffeehound

Thanks very much, ThemeOne, that's helpful.

Potbellypig

Don't let someone else hold the umbrella, coffeehound.

TheCyclingProgrammer

As I said, training for new skills to enable you to do a new job is not a tax deductible expense. It does not pass the wholly, exclusively and necessarily rule.

Training to enhance or maintain existing skills that relate to the job you are doing is usually tax deductible.

It's a bit of a grey area, there isn't a one size fits all answer and it's hard to give more than the above general advice without further context.

Pennywise

The wholly, exclusively and necessarily test only applies to employees/directors who pay personally and then reclaim it from their company.

If the company contracts for, and pays directly, for the training/course, then the test is merely "wholly and exclusively" which is a far easier test to meet.

As long as the training/course eventually benefits the company itself, i.e. by the employee/director getting more lucrative contracts performed through the company, then it's usually allowable.

Your trouble will be that you don't have a pre-existing company. You'd need to get it set up and start contracting through it according to your current qualifications/ability/experience, for a while, before your company incurs the training costs, and then you'd need a period of contracting at higher levels afterwards to "prove" it was for the benefit of the company.

I've had this argument with HMRC inspectors a few times and after a bit of too-ing and fro-ing and referring them to the relevant sections of their business income manual and employment income manual, I've had it allowed every time.

I've found I can secure tax relief for professional/trade higher qualifications such as financial advisors taking higher exams to get to the top tiers of authorisation when they started off contracting as lowly paraplanners, or another example was a book-keeper trading through her own limited company who successfully claimed accountancy training/exams which then allowed her company to trade as a qualified accountancy practice. The key is that the company was trading at a low level before the training/exams and then traded at a higher level afterwards. Another key point is that the same training would have to have been available and incurred for the benefit of the business, had the person been a mere employee rather than the director to avoid any challenge that it was done purely for personal benefit.

https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim47080

The main area where you are unlikely to succeed is if you're doing something general and personal, like an MBA, rather than something specific to your trade allowing you to trade at a higher level.