Q&A: training costs and tax liability
11 Feb 2020
In our regular Q&A series from Croner Taxwise, tax adviser Laura Burrows CTA looks at tax compliance issues when deducting training costs from employment income
11 Feb 2020
Q. My client is a surgeon who is currently employed by the NHS. During the year, he has attended various training courses to enable him to keep up to date with changes in the profession and gain new qualifications to further his career. Can he deduct the cost of attending these courses from his employment income?
A. The legislation does provide for relief for the costs of work-related training under s250, Income Tax Earnings and Pensions Act 2003 (ITEPA 2003) but this will not apply in this instance because relief is conditional on the costs being incurred or reimbursed by the employer.
Outside of this rule, to obtain relief for training costs paid for personally we need to look at the terms of ITEPA 2003 which requires that the employee is obliged to incur the expense as the holder of the employment, and that the expense was incurred ‘wholly, exclusively and necessarily in the performance of the duties of the employment’.
It is HMRC’s view that training expenses incurred personally by an employee are not deductible under s336, ITEPA 2003 even if the subject is relevant to the nature of the employment.
This is based on the opinion that they are not incurred ‘in the performance of the duties of the employment’, ie, a surgeon’s job is to treat patients, not to attend training courses.
However, the case of R & C Commrs V Banerjee  BTC 662 identified an exception to this long-standing view.
The Court of Appeal accepted that a deduction for training costs incurred by an employee should be relievable under s336 where the employee was employed on a training contract and undertaking training was an intrinsic contractual duty of the employment.
Therefore HMRC may allow relief under s336 if the employee is employed under a training contract the terms of which meet the following criteria as provided in Employment Income Manual (EIM32535):
- training in an intrinsic part of the contractual duties;
- all other duties are being undertaken as part of the training;
- there is a mandatory requirement for the employee to undertake the external training as an intrinsic part of the duties of employment; and
- failure to complete the training and obtain the qualification will mean that the employee will not be able to continue in employment with the employer in the role that would otherwise have been available to them after qualification
Additionally, HMRC has identified a number of training courses specific to the medical profession where relief for training costs incurred will qualify for relief as they meet the above conditions.
A list of these can be found in their Employment Income Manual at EIM32540. As your client works within the medical profession then if the courses he attended appear on this list then he can claim relief for the costs incurred.
About the author
Laura Burrows CTA, tax adviser at Croner Taxwise, tel: 0844 892 2470
This article first appeared on Croner Taxwise