Just a quickie on behalf of a friend who is a sole trader working as a driving instructor (cars). If he takes a course to qualify as an LGV driving instructor is this an allowable expense?
I know new skills are not allowable but it is expanding in some way on existing which are in a related field, however his business can continue to operate without undertaking this. I seem to go round in circles can anyone clarify?
Many Thanks
-- Edited by Saltire on Thursday 28th of July 2011 07:50:48 PM
If a computer programmer takes a course to learn more about a computer language from which they already earn a living then it is allowable (Say COBOL).
If the same computer programmer takes a course in a different computer language (say Java) then it is not allowable as it is considered learning something new and it is not essential learning for them to carry on in their trade.
Relating this to your scenario you have to decide whether the course is an extension of the existing business required in order to continue to carry out the same trade or is it acquiring a new skill for a different market?
The place that many would look for an answer to this would be chapter 5 (section 250) and appendix 9 of the expenses and benefits guide (see http://www.hmrc.gov.uk/guidance/480.pdf).
reading the above would indicate thatt the expense would be alowable.... However, you would be better off looking at the revenues stance in the following :
EIM32525 - Other expenses: education and training: education costs - This very much puts emphasis on the wholly, necessarily and exclusively test where I think that your case would fail on the necessarily. (see here : http://www.hmrc.gov.uk/manuals/eimanual/EIM32525.htm)
EIM32530 - Case law related to the above. (see here : http://www.hmrc.gov.uk/manuals/eimanual/EIM32530.htm)
Not related to this case but interesting reading on examination fee's that I came across whilst looking at your scenario is this one :
All in all interesting scenario but from what I have read my stance on this would be that the two trades fall into the same sort of category as COBOL and JAVA and would not be allowable as picking up the LGV work is not an expense incurred wholly, neccessarily and exclsuively for continuation of the existing trade.
Would be interested to hear other peoples views on this (happy to be told that I'm wrong but if so, for reference please quote case law.... Over to you Bill!!!).
kind regards,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I know new skills are not allowable but it is expanding in some way on existing which are in a related field, however his business can continue to operate without undertaking this. I seem to go round in circles can anyone clarify?
Many Thanks
-- Edited by Saltire on Thursday 28th of July 2011 07:50:48 PM
If he can trade as a driving instructor without taking the course, then he should be OK. The training is not putting in him a position to trade (which would be capital and not allowable).
From what has been described, I feel that it is going to be a capital expense, as it does not update a skill already possessed by the proprietor.
He has a skill to instruct on cars but not commercial vehicles. He needs complete seperate training to acquire an HGV instructor qualification (possible even to aquire an HGV licence?)
This is an extract from the HMRC Capital vs Revenue self assessment toolkit check list
8. Have any costs incurred on training for the proprietor or a partner in the business been treated correctly?
Risk
In some circumstances where costs are incurred on training and development for a proprietor or
partner acquiring new skills etc, these may be regarded as capital expenditure for tax purposes
and therefore not allowable as a revenue deduction.
Mitigation
Establish whether training and development undertaken by business proprietors or partners is
to update expertise which they already possess, or to give them new expertise, knowledge or
skills. In the latter case, if the training brings into existence an advantage of sufficiently enduring
benefit the expenditure incurred may be capital for tax purposes and if so not allowable as a
revenue deduction.
Explanation
In addition to the Capital v Revenue expenditure test, to be allowable the costs of training and
development for the proprietors or partners must also be incurred wholly and exclusively for the
purpose of the trade or profession at the time the training is undertaken. For example, where a
completely new specialisation or qualification is acquired as a result of the expenditure, it is
possible that the expenditure will not be wholly and exclusively for the purposes of the existing
trade. Consideration should therefore be given to the allowability of the expenditure on the basis
of the wholly and exclusively test as well as Capital v Revenue grounds.
For further guidance see BIM42526 and BIM35660.
I think the key phrase is "updating skills he already possesses", which is not the case here.
Sorry, I've just re-read the OP - crucially I didn't see LGV! This changes my advice above, as your client cannot do this at the moment.
Now, if your client was to set up a limited company offering LGV training and his training was paid by the company, then that would be a different matter.
