Taxation of self-funded work-related training

Currently employees and self-employed individuals have access to relief against the costs of “work related training”.  This is defined as training for an employee’s current employment or a related employment or a self-employed person maintaining or updating existing skills (but not acquiring new skill sets which is covered via capital allowances).  This also includes a tax exemption for costs met by an employer for an employee who is about to leave, or who left less than 12 months ago, to attend certain courses of retraining intended to help them get another job or set up a business.

Where an employee’s costs are not reimbursed there is currently no scope for tax relief (with limited exemptions) because they are not incurred in the performance of the duties of the employment

HMRC statistics show that over 1.8M individuals self-funded work related training in 2016 The vast majority of these individuals were unable to deduct those costs from their income or have it provided tax free by employers.  There is strong evidence that the cost of training is a significant barrier to learning especially for those who could most benefit from it.  The Government wishes to extend the available tax and NIC reliefs available to make training more attractive and less costly as part of its wider strategy of enhancing work opportunities and maximising earning potential.

Objectives of the consultation

  • Support those needing to retrain or upskill or who need or want to change career
  • Support those undertaking training with approved providers and leading to qualifications
  • Limiting the scope for misuse of the relief
  • Be sustainable and affordable to the public finances
  • Be simple to understand and administer

The consultation closes on 8 June 2018 and the consultation document may be found at:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/689227/PU2152__Consultation_on_self-funded_training_web.pdf

The consultation raises 14 questions covering the underlying issues, the validity of the stated objectives and compliance risks.  The underlying concept is an important plank in the upskilling of the UK’s workforce and this is an early opportunity to make your voice heard in the design of a new system of tax and NIC reliefs.