Training costs against TAX

[ecco123]

Is it possible to deduct TAX from the training costs in the UK?

I've search both the forum and the web, but still I don't get a clear answer.

In this thread it's stated (post #1) I think Gordon Brown says no unless you have a job offer before you start flight training

http://www.pprune.org/professional-pilot-training-includes-ground-studies/278364-training-writing-off-against-tax.html

What about a airline sponsored or part-sponsored scheme?. I mean if you are chosen are offered a job in the airline conditioned to undertake the training, will this training be a deductible expense? What about the Loan interest?

In that other thread, user jemax mention (post #3) So if you spend say £100k training your first £100k earnt doesn't attract tax.

http://www.pprune.org/professional-pilot-training-includes-ground-studies/477138-offset-atpl-course-costs-against-tax.html

May he be refering just to self-employed pilots?

I also found this article: Tax relief for pilot training costs | AccountingWEB (http://www.accountingweb.co.uk/anyanswers/tax-relief-pilot-training-costs)

Maybe someone here can put some light on the issue?

[nick14]

It's dodgey at best and is only really permitted by self employed pilots and even then only costs directly relating to that specific employment which basically means anything pre type rating is not allowed to be claimed for.

Spoken to a few accountants and they all have the same opinion that unless it is Souly for the business it's not allowed.

[Dct_Mopas]

Hi,

There was a court case a few years back (Edgar vs. HMRC) the outcome was that you cannot deduct tax from flight training costs.

However you could deduct tax for professional fee's paid to the CAA. This was acknowledged by HMRC.

This only really becomes possible when employed by an airline shortly after completing the ATPL as you need to be employed commercially for the fee's to be classed as 'professional'. However different people got varying levels of success depending on the circumstances.

However, in theory, you can claim tax relief for licence endorsement fee's/ atpl ground exam costs/IR flight test/ etc. This is a one off rebate as these fee's helped you gain employment and so technically you have no choice but to pay them to secure a first commercial flying position.

[Bealzebub]

It is a long time since I worked for "the revenue" and this reply is only of a broad and general nature. The rules can be very complex and you would need up to date and specific advice to answer a particular question.

The magic words are often "wholly, exclusively and necessarily" when it comes to tax relief for allowable expenses.

Generally speaking, you cannot claim an allowance for expenses incurred that put you in a position to do a job. The following extract is from HMRC:

You can only deduct necessary expenses (those that each person doing exactly the same job as you would have had to pay out) and they have to have been paid out in doing your job, not getting you to a position where you could do your job.

The words ‘wholly and exclusively’ also appear as part of the general expenses rule for employees in S336 Income Tax (Earnings and Pensions) Act 2003. For employees, one leg of the test for a deduction to be allowed for an expense amount is that it must be incurred wholly, exclusively and necessarily in the performance of the duties of the employment.

There are schemes that have been agreed with HMRC whereby a proportion of training costs are allowable against the tax liabilities of individuals who have incurred a "training bond" as a cadet pilot, whereby that "training bond" is repaid over a number of subsequent years by the partner employer. These schemes are not particularly common, but they do allow a proportion of the pilots effective training costs to be offset against their income for the calculation of their individual income tax liability. There are time limits on these agreed schemes and the rules are fairly complicated in that the elements of the bond are broken down into capital and interest charges. These elements may then be subject to withholding tax where applicable. Nevertheless, the overall effect is usually significantly beneficial for the qualifying individual.

Broadly speaking, if you incur expenses that your employer requires "wholly, necessary and exclusively" in the pursuit of that employment and the employer wont pay them, then you have the basis of an allowable claim. If however those expenses simply put you in a position to be employed, then they usually aren't. So for example, airline "x" says you need to buy yourself a 737 rating before you can be considered for employment, then the test is not satisfied. If you are already employed by airline "x" and they won't pay for that rating then it might be allowable if you incurred the personal expense to continue in your employment. If airline "X" buys some A319's and offers you the chance to change fleet at your own expense, then the "wholly, necessary and exclusively" test wouldn't likely be satisfied, since the "necessary" part wouldn't apply.

What about a airline sponsored or part-sponsored scheme?. I mean if you are chosen are offered a job in the airline conditioned to undertake the training, will this training be a deductible expense? What about the Loan interest?

You would need to find out if the scheme (as I mentioned above) was agreed with HMRC, and that you qualified under the terms of that agreement. If the answer to both parts was "yes" then a specific amount of the training costs or "bond" would be allowable once split into capital and interest on an annual basis for a specific number of years provided that the agreement and your qualification remained intact for the duration of that term.

The agreements that I have seen, generally involve the airline deducting the cadets training costs in the order of around £1000 - £1200 per month and then repaying them (the same or a similar amount) from a bonded sum (most of their effective training costs) for a period of 5-10 years. The net result for the cadet is that most of their expensive ab-initio training costs become allowable for income tax purposes for anything up to a decade afterwards, provided the individual remains employed by the airline and enrolled in the qualifying scheme.


However, in theory, you can claim tax relief for licence endorsement fee's/ atpl ground exam costs/IR flight test/ etc. This is a one off rebate as these fee's helped you gain employment and so technically you have no choice but to pay them to secure a first commercial flying position.

For the reasons given above, that wouldn't be the case. It doesn't matter what your "choice" is, expenses that are incurred in the pursuit of a job are not generally allowable.

[ecco123]

Thanks a lot, that's a very thorough explanation.

So each case is different and has to be studied in detail. At least I looks like in a part-sponsored scheme, the part taken from your income to pay back airline investment (salary sacrifice as some call it) should be allowable.