While you may have revelled the thought about finishing your qualifications at school/college/university, for a lot of people learning continues far beyond the conventional educational institutions. Work-based learning to ensure you keep your own or your employees’ skills as up to date as possible has become the norm, with many roles needing continuous development alongside the initial training. From a tax perspective, relief or exemptions may be available for the cost of qualifications, whether they relate to initial training or ongoing learning.
The provision of work-based learning by an employer may be exempt from Income Tax and National Insurance Contributions. To qualify for exemption, the training must be useful to or better qualify the employee when carrying out their role.
This means that, if you are employed as an HR Advisor and your employer pays for your CIPD training, the cost of the training is exempt. For roles that require it, Continuous Professional Development (CPD) costs paid for or reimbursed by employers will also qualify for exemption, as long as the CPD undertaken relates to the employee’s role.
If the rules are not met and your employer still pays or reimburses you for your qualification, a taxable benefit will arise and you may have to pay Income Tax and National Insurance Contributions on the cost.
Employers may be able to treat staff training costs as a deduction from their profits. The costs will also be exempt from Employers’ National Insurance Contributions as long as the rules relating to work-based learning are met.
If the work-based learning rules are not met, either Class 1 or Class 1A Employer National Insurance Contributions may be due on the cost.
As a self-employed person, you may be required to hold formal qualifications or undergo CPD to carry out the work that you do.
Relief is only available where the costs incurred relate to updating or maintaining current knowledge specific to the self-employment. For example, a criminal barrister going on a training course to learn about recent updates to the Police and Criminal Evidence Act can deduct the cost of that course when computing their profits.
If that person were to train in a new field, whether related or otherwise to their current self-employment, the costs would not be deductible when computing their profits. For example, if the same criminal barrister decided to retrain as a tax barrister or even a farmer, in either scenario the training costs would not be deductible.
As you can see, work-based learning, either as initial training or ongoing maintenance of knowledge, may be a tax-efficient cost as long as the relevant rules are met.
If you have any questions about whether the training you are undertaking or you are offering to your employees qualifies for beneficial tax treatment, please get in touch with Robson Laidler’s Tax Advisory team or email us directly: firstname.lastname@example.org