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Training course gives lesson in tax

This month, the tax discussion groups focused on the taxation training fees of a client who was currently employed but expecting to be made redundant from his current employer, a corporate training consultancy.

March 2019

The accountant explained his client, expecting his employer to make him redundant, had set up a new limited company through which to market his services. As part of his new business plans he had realised that he needed to widen his expertise and had taken a training course that he had paid for personally.

The course fees were £5,000, and after hearing of the course, his employer had agreed to reimburse him for part of the fees.

The client had thought that they would be able to claim the remainder of the expenses against their taxes, either as part of their current employment, or for their new limited company.

The discussions therefore concerned whether these course fees would be allowable employment expenses for either of the limited companies.

It was felt that they would be eligible corporation tax deductions for the current employer provided they could be proved to be necessary for the job he was currently undertaking. Indeed, as they had only reimbursed part of the fees, it meant that any personal benefit had been borne by the employee. It was felt that the client should carefully consider whether the expenses were able to be claimed under s336 ITEPA 2003 as part of the existing employment.

After discussion it was felt that these remaining unreimbursed costs were not tax deductible in the new limited company. The training costs were incurred by the client prior to the commencement of his new limited company, while he was employed elsewhere. It was felt that they could be challenged on the basis that they were not incurred in the performance of the duties of the limited company.

The VAT aspects of the discussions are beyond the scope of this article. It was felt that this is another case where the client might have been better off if he had received tax advice in advance of his decisions.

Each month with the exception of July and August the Tax Discussion Groups in Croydon and South East London meet to discuss client tax issues on a no-names basis. These meetings are free to attend & normally cover over a dozen tax issues raised by those attending.

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