Training costs: HMRC shifts ground

Updated HMRC guidance makes interesting reading if you are self-employed and decide to upskill. Is the training tax deductible — or not?

There are two basic conditions for deductibility:

• expenditure is incurred wholly and exclusively for the purposes of the trade and
• it is revenue, not capital expenditure: in other words, it does not provide an enduring benefit for the business.

In practice, it can be difficult to decide. Following many years of a more restrictive approach, HMRC’s new guidance suggests training costs should usually be treated as revenue expenditure if the aim is to update your skills for a current business. Deductibility may also extend to acquiring new skills to keep you up to speed with advances in science and technology relating to your existing business. And in another subtle shift of emphasis, it may likewise extend to training courses ‘ancillary to the main trade’, such as basic bookkeeping or digital skills. What it rules out, on the other hand, are costs for training to enable you to start up a business; or if you are already in business, to branch out into a new, unrelated line of trade.

Much will depend on the facts of your individual circumstances, and we are happy to advise further.