In our professional lives, most of us participate in some kind of ongoing learning. Sometimes this continued professional development is a membership requirement of your professional body.
Often the motivation is a real interest in industry developments and a desire to stay ahead of the game especially if you’re self employed. If you’re employed, it may be driven by company policy.
The good news is HMRC can consider the cost of professional training to be a business expense.
No, it’s not as simple as ‘deduct cost of courses from your profit figure.’ There are some very specific regulations to follow. But you didn’t expect anything else, did you?
It doesn’t matter if your online course is with The open university or Udemy don’t forget about the tax relief you could claim back.
If you are self employed here’s what you need to know to make sure you declare all of your tax deductible learning,
We include a paragraph for employed people under PAYE as well so keep reading.
What online courses and professional training are allowable?
HMRC are very clear that the learning you do is only “for training that helps you improve the skills and knowledge you use in your business.” They give the example of a ‘refresher course’. But it can be any seminar, course, lecture or online course that supports your business.
The main point is that it must be about your current business. The course cannot be for:
- personal interest or a hobby.
- a new direction for your current business.
- to lay the groundwork for starting a new business.
Online course tax relief example
For example, you’re an electrician and you’ve taken these three courses:
- Training on how to use new software that helps you do your everyday work.
- An online course that explains new legal requirements in your industry.
- A wood working course run by a local expert.
The first two are directly relatable to your current business, and are tax deductible. The third is a brand new skill that’s nothing to do with your work (which is why you want to do it!) and is not declarable as a business expense.
Does it matter who runs the training course?
The provider of your course should not effect your eligibility to claim so you shouldn’t need to worry about if you choose Udemy, The Open University or another online course provider if you or your business meets the criteria tax relief should be available.
How the course is delivered isn’t relevant either for tax purposes meaning your course can still qualify for relief if it’s done in class or by distance learning on or offline.
Who’s doing the online course?
Your tax position for continued professional development (CPD) also depends on the status of the person involved. Here’s a quick rundown.
- New self employed sole trader: Any training costs will likely be considered as capital expenditure, because you’re continuing professional development by improving your skills and knowledge.
- Experienced self employed sole trader: Money spent on keeping your knowledge up to date will be classed as a revenue expense, to be declared with all your other business expenses on your self assessment tax return.
- Limited company directors and employees: If you pay for training for your company directors and/or employees, these costs usually qualify for corporation tax relief. And in an incorporated company, this includes courses to develop new skills, like Stress Management, or a new branch of the business.
The only time this doesn’t apply is if the course has nothing to do with the business and is entirely recreational (like lawyers doing a Yoga Retreat or white water rafting). In these cases, you declare the cost as a benefit in kind on form P11D and pay the requisite National Insurance Contributions.
It’s not just the cost of the online course you can claim
A bit more good news for you now. There are several other business expenses you might be able to claim, alongside the price of the training, including:
- Bus/train/plane ticket.
- Parking.
- Tolls.
- Other localised travel costs, like a congestion charge.
- Hotel costs, if you need to stay overnight.
- Necessary food and drink (non-alcoholic), known as ‘subsistence’ in tax-speak.
- Business calls while you’re away, and any printing charges.
- Books that are related to a course that’s allowable.
All of the travel and subsistence costs don’t apply if the course is held at your everyday workplace.
Always keep receipts for online courses and qualifications
It doesn’t matter if you’re 100% certain whether or not a course (and it’s connected costs) are tax deductible or not. Just keep an accurate record and all the receipts digitally.
Your accountant (or you can ask HMRC) can then decipher the rules in relation to your situation. Then, whatever’s tax deductible, you can be confident that you’ve got all the evidence HMRC needs.
Online courses and qualifications for the employed
The rules for employed tax payers under PAYE are different to the self employed. If you have to incur the cost of training yourself and you are not reimbursed by your employer you may be able to claim tax relief on the cost.
To be allowable for tax relief the training cost must be wholly, exclusively and necessarily incurred to do your job.
Training for a new position would not be allowed because to be allowable it must normally be contractually obliged to help carry out your current role.
We go more in depth on the tax relief available for PAYE employees here.
Tony Shanks