The case for training (and tax relief)
Where do you come on the scale below?
Some things you should know:
1: Most people are somewhere in the middle on that scale.
2: Many people forget to claim tax relief on their training.
3: The team at Coracle are here to help you get a tax efficient training programme up and running today!
One question that we get asked from time to time is how to set up training schemes that are also tax efficient. (We’re not accountants and we can’t offer specific advice, but we can highlight some aspects of the current UK situation that might help you justify re-looking at your training programmes.)
Tax relief for all?
Many people assume that training costs get tax relief, assuming that the training improves skills of the employees. As is often the case with tax, that may or may not be the case.. It depends on who pays for the training and what the training is for.
Who pays matters
If an employee pays for their own training then there is, generally, no tax relief available. However, if that person is doing the training as an absolute need - i.e., the training is ‘wholly, exclusively and necessarily incurred’, then tax relief is available.
The rule of thumb is that unless the training is necessary, the cost isn’t deductible.
Another point to be careful of is that where an employee pays for their own training and then reclaims the cost through expenses, this becomes a taxable benefit in kind.
When it comes to the training being paid for by the employer, the situation is somewhat simpler. Essentially, any training which helps employees to improve their performance in their job (this covers a very broad spectrum) is allowable.
For this reason it makes a lot of sense to get the employer to pay for the training and if that goes against a company policy for any reason, ask the manager responsible to set up a salary sacrifice.
Training is recognised and encouraged by the government through its use of tax relief and also through the scheme which came into force in 2010 which gives employees the right to request time off for training.
Anyone employed has the right to ask for time off for training or study so long as they are classed as an employee, have worked for their employer for at least 26 weeks, that the training aims to help them do their job better and that the organisation has at least 250 people employed. The right to take the time off is one thing but employees should remember that the time off itself is unpaid, unless the employer agrees to pay.
If a request for training time off is received by the organisation then they have 28 days to accept the request, or to meet with the applicant to discuss the request.
The employer may turn down the request if the training won’t benefit the business, or the request would result in extra costs for the business, or the business wouldn’t be able to meet customer demands, or the business can’t re-organise the work among other members of staff, or the business can’t recruit extra staff, or it would damage quality and business performance, or there wouldn’t be enough work for the employee to do at the times they intend to work, or it conflicts with planned structural changes.
The big question and a top tip
Now that we have the fundamentals in mind, what about the scenario where an organisation invests in an online training scheme for their employees and then offers the training content to customers, as a form of value-added service?
We checked with a tax advisor to see if that would reduce or remove the tax relief, who confirmed that the cost of the online training scheme would be an allowable expense, whether it was for staff or customers.
With this in mind, why not make a plan to invest wisely in a training scheme that benefits your staff, your customers and offers tax relief.