There is often a grey area around claiming training costs and CPD.
The rules are that “new skills” training can’t be claimed; CPD style training can be claimed.
By way of background, new skills training is considered to be incurred to put you in the position of being able to work, rather than as a requirement of working, so its disallowed.
On the other hand CPD, to keep your skills fresh, can be claimed.
Of course the dividing line isn’t clear. Suppose you are a software engineer trained in programming desktop computers, and you attend a course in writing smartphone apps? Or suppose you are an electrician, and you attend a course to become a home cinema installer? A MD undertaking an MBA?
Alas there is often not a clear cut distinction and judgement is called for, which can include considering whether the amount is material, and whether the training is new skills or updating. Be prepared to justify a claim later, and think about ethics – a good test is how would you feel explaining your decision to a stranger at a dinner party?
Travel and accommodation for CPD can be claimed, and there is no outright bar on expensing foreign travel for training, but be aware it may be scrutinised by HMRC so be prepared to justify it as training and not a holiday.
In their Internal Manuals, HMRC say:
Expenditure incurred by the proprietor of a business on training courses for themselves is revenue expenditure if the course merely updates existing expertise or knowledge. Expenditure on a course which provides new expertise or knowledge is capital.
Revenue expenditure is allowable against profits; capital expenditure isn’t, unless covered by Capital Allowances (which only apply to equipment, not services)
HMRC’s views were originally published in Tax Bulletin 1G in November 1991:
There is some uncertainty whether the cost of proprietors of a business attending a training course, directly related to the business activity, is deductible in arriving at the [trade] profits chargeable to tax.
Where attendance at a course is intended to give business proprietors new expertise, knowledge or skills, which they lack, it brings into existence an advantage that is of enduring benefit to the business. We take the view that the expenditure is therefore of a capital nature, and deduction is prohibited by [S33 Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005)].
On the other hand, where attendance is merely to update expertise etc. which proprietors already possess, the expenditure is normally regarded as revenue expenditure and will be deductible if it satisfies the “wholly and exclusively for the purposes of the trade” test in [S34(1)(a) ITTOIA 2005]’ – see BIM42105.
Their guidance to Tax Inspectors is:
You should therefore allow proprietors a deduction for expenditure that merely updates existing expertise or knowledge but disallow any expenditure that provides new expertise or knowledge (particularly where it brings into existence a recognised qualification like a Master of Business Administration).
Remember HMRCs guidance is not law. It’s their interpretation of law, which can only be created by statute or court decision. However going against HMRCs guidance is something people should not do lightly.