Press release: ATT welcomes new look at tax rules on training costs

Currently, where an employer pays for or reimburses a work related training cost for an employee, the employer receives tax relief for the costs incurred and there is no taxable benefit for the employee. However, where an employee meets the cost of further training undertaken to enhance their skills but this is not reimbursed or paid for by the employer, even if the training is relevant to their work the employee must pay for this out of their taxed income.

Michael Steed, Co-chair of ATT’s Technical Steering Group, said:

“The issue of whether tax relief should be available to those self-funding their training costs was raised in a number of responses to a call for evidence last year on the Taxation of Employee Expenses² and also in Good work, The Taylor Report on Modern Working Practices,³ so the ATT welcomes the publication of this call.”

Under the current system, a self-employed individual can generally obtain tax relief for the cost of updating or maintaining existing skills that they already have. Relief is given when computing the individual’s profits for income tax and National Insurance. However, the costs a self-employed individual incurs acquiring new skills which might allow the business to expand or change direction are generally not deductible for tax.

Michael Steed continued:

“At present, the self-employed are operating at a disadvantage when it comes to acquiring new skills. If they choose, in their role as an employer, to invest in their employees and train them in a new skill, that cost is tax deductible for the employer and there is no tax cost to the employee. However, if a self-employed individual wants to invest in their own skills – perhaps to grow their business or take it in a new direction – that investment is considered to be capital cost, and no tax relief is available. This is in stark contrast to the work-related training provisions for employees, where no such capital/revenue fault-line exists.

“This call for evidence offers an opportunity to adjust the tax rules so that they support and encourage vital training of both employees and the self-employed.”

Notes for editors

1. The call for evidence can be found here. The call notes at 1.9 on page 3 that HMRC estimates that around 500,000 self-employed individuals self-funded work related training in 2016.
2. The outcome to the consultation on Taxation of Employee Expenses can be found here.
3. Good work, The Taylor Review of Modern Working Practices can be found here.