External Training in Ltd Company
Discussion
Okay, purely ficticious situation for the purposes of the question:
Smiths engineering ltd, a one-man operation, is a specialist in oilrigs, and mr smith wants to get into commercial diving. Can smiths engineering fund his diving course as a pre-tax outgoing, as long as some income for the company is shown after the training period?
Out of curiosity....?
Smiths engineering ltd, a one-man operation, is a specialist in oilrigs, and mr smith wants to get into commercial diving. Can smiths engineering fund his diving course as a pre-tax outgoing, as long as some income for the company is shown after the training period?
Out of curiosity....?
Yes and no.
Staff training is usually an allowable cost for a business - as long as the nature of the training was "wholly and exclusively for the purpose of the trade.
Training of a director is covered by the same test, although there are two additional aspects to consider-
i) did the director obtain any private benefit from the training (e.g. was it linked to a "hobby"
and
ii) the magnitude of the expenditure. Spending a few hundred £s on a course would probably go unchallenged in a business set of accounts. Spending thousands of £££££££££ might be queried by the Revenue.
As you mentioned the words, "Limited Company", I have couched my answer in that context.
You must weigh up the cost and consequences of operating a company.
You mention that the company "might" generate some income. That would bring into question whether it was a legitimate trade.
Also, if it was recognised as a bona fide trade but its costs (including training) were well in excess of its income, what use would the losses be to the directors of the company?
They can't offset the losses against personal income. All the company can do is carry the losses forward against future taxable profits of the company - which may never materialise. All that effort for nothing, in my opinion.
Staff training is usually an allowable cost for a business - as long as the nature of the training was "wholly and exclusively for the purpose of the trade.
Training of a director is covered by the same test, although there are two additional aspects to consider-
i) did the director obtain any private benefit from the training (e.g. was it linked to a "hobby"
and ii) the magnitude of the expenditure. Spending a few hundred £s on a course would probably go unchallenged in a business set of accounts. Spending thousands of £££££££££ might be queried by the Revenue.
As you mentioned the words, "Limited Company", I have couched my answer in that context.
You must weigh up the cost and consequences of operating a company.
You mention that the company "might" generate some income. That would bring into question whether it was a legitimate trade.
Also, if it was recognised as a bona fide trade but its costs (including training) were well in excess of its income, what use would the losses be to the directors of the company?
They can't offset the losses against personal income. All the company can do is carry the losses forward against future taxable profits of the company - which may never materialise. All that effort for nothing, in my opinion.
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