Self-funded work related training

Tue 13 Mar 2018

One of the areas where a consultation was announced was training; specifically the difference in treatment between training that an individual funds personally and that paid for by an employer.

This is a key area of Government focus given the need to grow the UK economy, to innovate and to increase productivity. The consultation seeks to help the government better understand:

• how it could design an extension to the existing tax relief that focuses on supporting good quality training for those wanting to upskill or retrain, particularly those who want or need to change career; and
• how it could design an extension that prevents misuse on recreational activities, is sustainable for the public finances and is simple to understand and administer

The Government feels that this consultation is appropriate given that employees who currently pay for their own training costs to help enhance their learning and development often do not receive any relief from tax (there are limited reliefs available).

This means that the majority of training costs incurred personally by an individual don’t at present qualify for a tax deduction unless the employment involves certain research or the employee is undertaking a training phase of their career where the attendance at external courses is necessary (and a key intrinsic element) for their employment. Therefore individuals’ relief is significantly restricted, unlike the generous exemption for employer provided training.

The current exemption means that employers can provide training tax/NIC free where:

“Any training course or other activity which is designed to impart, instil, improve or reinforce any knowledge, skills, or personal qualities which:

• are, or are likely to prove, useful to the employee when performing the duties of the employment or related employment

• will qualify or better qualify the employee to perform the duties of the employment or

• will qualify or better qualify the employee to participate in charitable or voluntary activities performed in association with the employment or related employment”

Given the broad exemption available to support employers training costs, the government seeks to assess what changes can be made to help improve and encourage individuals to take a more active stance on their learning and development.

The consultation closes on 8 June 2018 and any organisation / individual is free to respond.

Aspects that will require consideration include:

1. whether the self-funded training can utilise the current definition tax/NIC free training costs provided by an employer;
2. how the self-funded training may align with wider funding for skills development (e.g. T Levels, apprenticeships and industry led support); and
3. how the Optional Remuneration arrangements interact with training costs and whether changes to these rules could help enhance / improve investment in training and personal development.

The government has identified the development of skills as a critical area to help the UK grow post Brexit. Whilst it is aware of previous issues in the past with providing encouragement via tax reliefs for training support, as referenced in the Consultation, and that it does not want to encourage mis-use of any changes to tax reliefs available (e.g. used for recreational or entertaining purposes), the consultation demonstrates the seriousness to which the government is investing in new approaches to helping individuals and businesses in the UK realise their potential.

AUTHOR: Vaneeta Khurana