Up until now, expenditure incurred by the owner of a business on training courses for themselves has not necessarily been tax deductible.

HMRC’s approach has been to deny any tax relief for expenditure on a training course which provides new expertise or knowledge, rather than being a refresher or an update. HMRC saw the costs as a capital investment, not a revenue expense.

HMRC’s old views were based on the High Court’s decision in Dass v Special Commissioner and others [2006] EWHC2491 (Ch). In that case:

  • An English tutor who also worked as an advisor in the bringing of appeals before various tribunals claimed tax relief on the costs of taking a law diploma.
  • He considered that the training would expand his know-how. HMRC and the court disagreed.

In 2023 HMRC said they would review tax relief in this area and they have now quietly issued updated guidance at the end of February 2024 in BIM35660.  HMRC’s current guidance now confirms that any training course undertaken by the proprietor of the business, will be tax-deductible if wholly and exclusively incurred for the purposes or ‘ancillary purposes’ of the trade or business.

This new approach aims to consider the fact that sole traders often need to undertake training to acquire new skills or knowledge to keep pace with advancements in technology and changes in industry practices in their business area.

The changes mean that the costs of any training in the individual’s existing business area will now be tax deductible against the profits of the business provided that either it:

  • Updates existing expertise or knowledge.
  • Provides new expertise or knowledge.

HMRC provide examples in Business Income Manual (BIM) BIM35660 to illustrate when relief will apply. As always, the guidance leaves a few grey areas and whether the training is tax deductible or not will depend on your exact situation and circumstances. We have provided some of our thoughts on the examples provided.

HMRC: ‘Expense likely to be allowable’

Example 1: Kiran works part-time as a wedding photographer. She wants to improve her photo editing skills, so she attends an online refresher course on using photo editing software.

Our comment: no mention by HMRC as to whether the online course would be allowable if the photographer took the course to use a new type of software, we assume it would be.

Example 2: Ryan is a plumber and attends a beginners’ bookkeeping course. Although the course will not help Ryan with the skills he needs as a plumber, it will teach him how to keep accurate accounting records, which will help him run his business better. The cost of the course is likely to be an allowable expense.

Our comment: It has always seemed odd to us that business owners could not claim for learning how to run a business!

Example 3 Tim is a potter, and he takes an e-commerce course and then a short, introductory course on website development. The courses are not directly related to pottery, but they teach skills in online selling. The costs of the course are likely to be an allowable expense.

Our comment: is the word “short” relevant in this example? Will HMRC seek to limit the time/cost that is seen as tax allowable?

Example 4

Alex is a website designer and takes a course on Artificial Intelligence (AI) technology for online applications. ‘The course will give Alex new expertise in an upcoming area of technology related to her business. The costs are therefore likely to be an allowable expense.’

Our comment: As AI is potentially ‘related’ to any digitalised or online business, presumably this type of course is capable of being allowable for most online businesses.

Example 5

Aditya fits gas boilers. He completes training to install heat pump systems because heat pumps are new and upcoming technology and an alternative to gas boilers. The cost of the training is likely to be allowed as an expense of his business as heat pumps will replace gas boilers and Aditya is acquiring skills to keep up to date with modern technology.

Our comment: A course teaching a new skill is allowed due to changes in technology in that industry.

Example 6

Felicity is a personal trainer. She attends a course to improve her understanding of nutrition and gains a basic qualification in nutrition. The knowledge that she gains will also help her to develop better training plans for her existing clients so the cost of the course will be an allowable expense.

We comment: this example is very close to that in the Dass v Special Commissioner case that originally disallowed such costs as being tax deductible. Will there need to be a change in the law.

Example 7

Aisha runs an online store selling children’s storybooks that she writes. She attends a beginners’ course on drawing illustrations. The cost of the course is likely to be an allowable expense because Aisha is using her skills to improve the children’s storybooks that she creates.

Our comment: never really made sense that it wouldn’t be allowed as it is all part of the production of a book.

HMRC examples: ‘expense likely to be disallowable’.

Example 8

Amari is currently unemployed but wants to become a driving instructor and start his own business. He completes a course so that he can become an approved driving instructor and wants to claim the cost of the course as an expense. Disallowed: this is to start a new business that does not already exist.

Our comment: we agree, no tax relief is available as he is not in business.

Example 9 

Robert runs a sportswear shop, selling branded clothing. He enrolled in a sports science degree at his local university because he has an interest in the field and thinks it will help him to understand his customers better. The costs associated with the degree course will not be an allowable expense because the knowledge Robert acquires will not specifically help him sell sportswear. The costs are therefore unrelated to his business.

Our comment: this could lead to some interesting debates. Science is so much a part of many sports training regimes that it depends on what is taught and whether that is going to further the business.

Example 10

Simone is a freelance makeup artist and wants to move into the tattooing business and open her own tattoo studio. She undertakes several tattooing courses and wants to claim the costs as an expense. The costs of the tattooing courses were not incurred for the purpose of Simone’s existing business and are unrelated to her makeup artist business, so they are not allowed as an expense.

Our comment: tattooing is quite an essential skill in the permanent make-up industry. Like other commentators on this guidance, we might be tempted to argue that this is extending her skills. She would presumably be able to use this in her existing business in any case.

Example 11

Craig is a taxi driver, but he wants to change his business and move into the painting and decorating industry. He completed a painting and decorating course at his local college and wants to claim the costs of the course. The cost of the course was not incurred for the purpose of Craig’s existing taxi-driving business and is related to the painting and decorating business he plans to set up, so it is not allowed as an expense.

Our comment: we agree, no tax relief as it relates to a different business, like example 8 that business has not yet commenced.

Whether or not training will be tax deductible may be a very grey area in some cases. If you’d like specific advice for your situation then get in touch via our website


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