Which training expenses can you claim via your company?

Ongoing training is key to enhancing your existing skills, and sourcing new contract work, but which training costs can you claim via your limited company’s tax bill?

Thanks to contractor accountants, Taxevo for answering our questions:

What type of training qualifies as a genuine company expense?

The cost of training can be claimed as a legitimate business expense by your company, as long as it is associated directly with your current trade.

There should be a tangible benefit to your company, and you should bear in mind HMRC’s general guidance that any expenses must be incurred wholly and exclusively for the purposes of the business.

If you follow this golden rule, then you can’t go far wrong.

Who is the training for?

In general, you should follow the same principles for training costs for both directors and employees. As a director, you are likely to have control over what training costs are paid for by the business. This gives a little more flexibility in the type of training that can be claimed. Alongside enhancing the skills that directly apply to your trade, you can also consider management skills and soft skills that will also add value to the business.

There is no reason why these other areas cannot also be made available to all employees if there is a direct benefit to the business.

What about training overseas?

There may be times when an opportunity arises to undertake an overseas training course. By all means, you can claim these costs but to ensure that the expense can be deductible against your company’s Corporation Tax bill, you must ensure that you can prove to HMRC that there was no personal element to the overseas trip.

As much as it may appeal to incorporate a holiday element into the trip alongside the training, you need to remember that for an expense to receive tax relief, it needs to have been incurred wholly and exclusively for the purposes of the business.

Is it a revenue or capital expense?

Training is usually a revenue expense and shown on the profit and loss account therefore gaining Corporation Tax relief in the year that the expense is incurred.

However, in some circumstances where expenditure on training results in new expertise and is of enduring benefit to the business, it may be classified as capital expenditure.

What if my client pays for training?

You may find yourselves in a situation where the client offers to pay for training. This should be avoided as it is likely to weaken your IR35 position.

A contractor genuinely in business on his/her own account would bear the costs of training themselves. Only traditional employees should expect training costs to be covered by their employers.

Seek expert advice

As training courses can sometimes run into the thousands of pounds, we recommend you also discuss any significant potential expenditure with your accountant first – to check whether or not the spending can be offset against your company’s tax bill.

Partner Contractor Accountants

Last updated: 12th December 2023