Hi there, i'm wondering if any of you can help me. I have a client/friend who is a jewellery designer maker. She has a very limited income and wants to study at university to increase her skill base etc. This is purely for her business development.
She is self employed so can she use the taxable student income loans/grants as income as well as her earnings for sales of her work and use the expense's occurred for collage IE. travel etc as well as her business expense's. She aims to still work a 16 hour week as she has children and claim tax credits too if she can ?
my gut feeling on this is that as it is purely business exercise, even though its a degree, that this is fine and allowable as training is an allowable expense.
Thoughts are very welcome, she is a good friend of mine also, so would hate to advise her badly.
If it is related to her business then could be argued would be allowed training costs however dont know of many courses that are run in jewellery design.
unless the course is a necessary requirement of her existing business then it's not an allowable expense.
For example. If a freelance IT developer takes a course to learn more about a computer language from which they already earn a living then it is allowable (Say a CICS course for a COBOL developer).
If the same computer programmer takes a course in IT systems analysis 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 existing trade.
Relating this to your scenario you have to decide whether the university 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 / profession?
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 that the expense would be allowable.... 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)
In an old thread Bill (Wella) came up with a similar scenario where a driving instructure would not be able to claim for a course in HGV driving in order to teach that as it was a different market so not what the business was making money at presently and hance not wholly, necessarily and exclusively incurred for the purpose of the existing business.
On this matter I'm just telling it as it is, I'm not saying that I agree with the HMRC stance as surely people should be encouraged to better themselves rather than punishing them for having the initiative to get up and try and build a business regardless as to whether it's anything to do with their current income stream.
Seems that the Government will throw money at you for sitting on your backside with your hand out but try to better yourself and they just build walls to try and stop you... Completely different debate there. Short answer is that all in all, unless the training is directly applicable to the current business it's tax non allowable.
kind regards,
Shaun.
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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.
She is already a jeweller which she earns a small living from. Her aim is to increase skill base which she will then generate a larger income. Its not a case of training in in a slightly different market or trade but will be an extension of her business. I will read the expences and benefit guide as i have that on my computer already and go from there.
I totaly agree about the decisions HMRC have made about these odd desisions to not help the motivated to get further. But acctually in this case I think its a viable option. She has been established since 2003 and makes very well made silver jewellery from basic skills, the course will provide a larger skill base and jewellery will evolve as she does it and she will sell this as she moves through the training.
Luckily there are some good things about living in cornwall and that is a brilliant art school, even if it is a bit of a drive. I'll look into it further just to make sure and pass on the info you have given me, thank you so much for pointing me in the right direction.
I'm not highly clued up on this but wouldn't the Revenue be more amenable if an employer were to send her to college/university?
Would it be completely transparent if she set up a limited company to do so?
thanks, Tim
Hi Tim
No it doesn't, unfortunately. Basically if they were an umrelated party, such as a true employee then it would be allowed but there are restrictions on controlling officers and their families, when it comes to training, further, or higher education.
Extract from BIM47080
.....Where on the other hand an employee or director of a company, on whom the expenditure is incurred, has a significant proprietary stake in the business or is a relative of those who do, there is obviously a much greater chance that expenditure may have been incurred not, or not wholly, for business purposes but to provide the employee with some personal benefit.....
Great, Bill. So much for my playing the wise guy. I deal with this stuff so seldom - maybe it'll sink in now. Agreed about capitalizing as it'll be for future profits. thanks bud. Tim
