How to claim training expenses via your limited company

Investing in improving your skills or those of your employees can give you a crucial edge when it comes to pitching for new contracts. However, before funding training via your limited company, it’s important to know what you can – and cannot – claim as a tax-deductible expense.

What type of training costs qualify?

Broadly speaking, the training course has to be relevant to the work you do in order to generate income for the company before you can claim.

Training should enhance or reinforce your existing skill set, increase your competency or proficiency, and help you perform better, all to the company’s advantage.

If the training can be shown to meet most, if not all, of the above criteria, then under HMRC rules, you can claim tax relief against the cost of the training. You’ll also be able to claim any associated costs, such as travelling expenses and accommodation.

See BIM42526 for HMRC’s official view on claiming training costs against your company’s profits.

Who is receiving the training?

If you’re the director of a limited company, there is some flexibility when it comes to what sort of training qualifies as a claimable expense.

Courses you can take include those aimed at improving your so-called “soft skills,” such as stress management, management skills, time management, and leadership.

This type of training can benefit the company if it makes you a more effective manager and, in turn, makes the company more productive. Even courses that do not have an immediate impact on the company can qualify as tax-deductible.

For instance, if you’re a contractor who provides IT support, you may be able to claim for learning about web design as you’re expanding the services your business offers to clients.

Training for employees

Generally, the same applies to company employees. If the training can be demonstrated to be wholly in the company’s interest, then it will qualify as a tax-deductible expense.

Care must be taken when the employee is also a spouse or family member.

For the sake of clarity, when considering paying for training, you should always ask yourself if this will benefit the company; if the answer is yes, then you should be able to claim it.

If, on the other hand, you want to send an employee who is also a family member on a graphic design course so that they can set up their own business, this will not be tax-deductible.

See BIM47080 for further information on staff training and development costs.

Can I claim for a training course overseas?

You may wish to acquire specialist training that is only available in another country or have been invited to attend a weekend course in Paris, for instance.

This may be a great opportunity and one you will take up anyway, but for HMRC to view this as a tax-deductible expense, you will have to prove that the trip was not for personal reasons.

This means disclosing details of the activities and training, as well as maintaining an itinerary for the event. You will also have to prove that the training was necessary for you to acquire new skills for the benefit of the business.

When you can’t claim for

You won’t be able to claim for training that introduces an entirely new trade or area of work unrelated to your current business activities. For example, if you’re an IT consultant, a floristry course would not be allowable.

While you may still put the expense through your company accounts, it likely won’t be eligible for corporation tax relief if it’s considered capital in nature.

However, new skills which are likely to benefit the owner’s business directly will usually be allowable.

Costs incurred on training to acquire new skills or knowledge to keep pace with advancements in technology and changes in industry practices, related to the owner’s existing business area, will usually be allowable.

Refer to BIM35660 for the distinction between revenue and capital expenditure.

What about a client covering the cost of my training?

Occasionally, a client may offer to pay to put you through an advanced training course, so you can add to the services you are already providing as a contractor.

Although this may be appealing, our advice would be to decline the offer. By accepting their offer, this could be seen as a strong indicator of ‘disguised employment’, as per the IR35 rules.

A truly independent contractor will pay for their own training, unlike employees.

Get professional advice

Knowing what you can claim for training isn’t always obvious, and for every rule, there seems to be an exception.

As always, before deciding to invest in training through your own company, consult with your accountant first to ensure the costs are allowable revenue expenditure against your company’s profits.