HM Revenue & Customs has some guidance on training costs here. Whilst it would be usual for tax relief to be given on training costs for an employee, this situation is complicated by the fact that the employee in question is the son of the director/shareholders.
The guidance states that, where the employee is not an unconnected third party, there is a greater chance that the expense is being incurred not wholly and exclusively for business purposes, but rather to provide the employee with some personal benefit. When deciding if the training cost is tax deductible, a key question will be: would they be willing to pay £15k+ for the second tutor (or anyone else doing the same job as their son) to get a Phd or are they are only really considering it for the first tutor because he happens to be their son?
-- Edited by Robert Pearce on Sunday 20th of May 2012 02:18:14 PM
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Pearce & Co - Chartered Accountant and Chartered Tax Adviser
I have just received an email and have been asked a tricky question from a limited company client who runs a training company.
The question is - if the company paid for the training costs for an employee to complete a Phd, would this be allowable against tax.
The company currently offers private tutoring on a range of subjects in the local area. At the moment, they simply have a database of training providers and act as a middle man and take a commission on all hours that each self employed tutor completes on their behalf.
They have decided that going forward that they would like to have two tutors who are employed by them, so that they can deliver a more personable course. This wil only befor two of there more popular courses english and history. Part of the reason for this is because their son has just completed his teacher training, has a degree in history and has also taught english in Japan for the past few years. They would like him to provide private tutition to small groups of university students as they feel it would be a very lucrative market.
Their son, who is now an employee, has asked if they could pay for him to complete a Phd at £15k +, so that it improves his cv and also adds some real substance in offering the higher level bespoke training.
On the basis of this information, I think that the Phd costs should be allowable against corporation tax, but also read that sometimes HMRC can view these high value training costs as capital costs - which my be allowable as a capital allowance.
I know it's a big ask, but has anybody got any knowledge on this type of question or expense.
