Can you reclaim the VAT and/or tax on training costs?
Hovering AND talking
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I have been out of the business of self-employed taxation so I might be wrong but I thought professional aviation training was classified as NVQ5 as therefore, costs could not be offset against PAYE. I think it was the Tory Government who introduced that one!
Usually in order to offset expenses against PAYE, the expenses has to be incurred wholly, exclusively and (this is the killer) necessarily in the course of your employment.
If you're talking about PAYE from a previous/current career whilst training, then I can't see that being allowed. Your taxation has to be relevant to the training you are trying to offset.
When I paid for part of my accountancy exams, I could not offset that against my PAYE but that was 1990.
Cheers
Whirls
Usually in order to offset expenses against PAYE, the expenses has to be incurred wholly, exclusively and (this is the killer) necessarily in the course of your employment.
If you're talking about PAYE from a previous/current career whilst training, then I can't see that being allowed. Your taxation has to be relevant to the training you are trying to offset.
When I paid for part of my accountancy exams, I could not offset that against my PAYE but that was 1990.
Cheers
Whirls
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I'm just reporting what my accountants managed to achieve for me, this was however, after some protracted negotiation with the Inland Revenue.
Oh and I forgot to mention you should look into working family tax credits too, if your earnings are unlikly to be high as a result of high training costs/low income it can be a significant help.
Oh and I forgot to mention you should look into working family tax credits too, if your earnings are unlikly to be high as a result of high training costs/low income it can be a significant help.
Avoid imitations
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Hi Whirls,
You should start charging for all this advice and let 'em claim the VAT back.
You should start charging for all this advice and let 'em claim the VAT back.
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Under the rules of my august Institute, I am not allowed to charge for advice as I do not have a Practising Certificate. Not all Chartered Accountants are Chartered Accountants!
Bit like the difference between a CPL(H) and an ATPL(H)!
Cheers
Whirls
Bit like the difference between a CPL(H) and an ATPL(H)!
Cheers
Whirls
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Best I'd just kept me mouth shut again. 
Hovering AND talking
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ShyT darling, there's no need to go off in huff - I've still got my work hat on!
Cheers
Whirls
Cheers
Whirls
May be nothing but... many EU states are now adopting the attitude/requirement that you don't qualify as self employed unless you are invoicing several "clients"...
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Mini
I think you're right. Otherwise it's seen as registering for VAT as Tax Avoidance I think. The Inland Revenue seem to be hot on that with computer consultants/contractors - where obfuscation is often used to hide code from those who would like to rip it off!
I think you're right. Otherwise it's seen as registering for VAT as Tax Avoidance I think. The Inland Revenue seem to be hot on that with computer consultants/contractors - where obfuscation is often used to hide code from those who would like to rip it off!
Hovering AND talking
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The Inland Revenue used to use several "tests" to determine whether someone was self-employed and it has been discussed at length here:-
http://www.pprune.org/forums/showthread.php?t=193338
Customs and Exvise didn't seem to be so fussy but now they are one organisation, HM Revenue and Customs, they are trying to unify their rules so it may become an issue.
Quite often though, it depends on the individual Inspector and what you can sometimes get away with! Taxation legislation is not cut and dried and there are different interpretations to the rules - that's what has kept so many of my fellow ACAs in Porsches!
Cheers
Whirls
http://www.pprune.org/forums/showthread.php?t=193338
Customs and Exvise didn't seem to be so fussy but now they are one organisation, HM Revenue and Customs, they are trying to unify their rules so it may become an issue.
Quite often though, it depends on the individual Inspector and what you can sometimes get away with! Taxation legislation is not cut and dried and there are different interpretations to the rules - that's what has kept so many of my fellow ACAs in Porsches!
Cheers
Whirls
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I've just done this, and HMRC in the UK are really quite sensible about this situation IMHO.
Their tests of self-employment attempt to look through to the economic reality of the situation, and the reality of a first freelance job is that you'll tend be working for a single organisation until your business develops. If that's still all you've done after a year or so, well they might start to beef.
I got a letter from the flight school that was going to give me work and put that in with my VAT registration, and by the time my first return came round, I had a few invoices to put in (albeit not for much money !). Since I'd blitzed out the CPL and Instructor courses within the six months before registration I was able to claim back the VAT on all of that, plus the small VAT element on the books for the ATPL groundschool which was within the three years cutoff. Came to just over £3,000.
Very nice thank you !
Their tests of self-employment attempt to look through to the economic reality of the situation, and the reality of a first freelance job is that you'll tend be working for a single organisation until your business develops. If that's still all you've done after a year or so, well they might start to beef.
I got a letter from the flight school that was going to give me work and put that in with my VAT registration, and by the time my first return came round, I had a few invoices to put in (albeit not for much money !). Since I'd blitzed out the CPL and Instructor courses within the six months before registration I was able to claim back the VAT on all of that, plus the small VAT element on the books for the ATPL groundschool which was within the three years cutoff. Came to just over £3,000.
Very nice thank you !
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puntosaurus,
Just want to check (im in a similar situation) - You now work for a company, but have reclaimed vat whilst training (what you could).
When you say "until the buisness developes", do you mean: you become self employed eg by a company who "hire" you as an istructor/pilot.
I am currently 3weeks into ATPL studies but not claiming any VAT back, if I claim it now and get it does this mean that within a year of employment I need to have do some self employed work???
Please help here - Confusing, but I think im in your situation a few years back???
MADY
Just want to check (im in a similar situation) - You now work for a company, but have reclaimed vat whilst training (what you could).
When you say "until the buisness developes", do you mean: you become self employed eg by a company who "hire" you as an istructor/pilot.
I am currently 3weeks into ATPL studies but not claiming any VAT back, if I claim it now and get it does this mean that within a year of employment I need to have do some self employed work???
Please help here - Confusing, but I think im in your situation a few years back???
MADY
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Sorry, should have made that clear. I did the training in the expectation of teaching and flying freelance for anyone who will pay me, ie genuinely self employed. I registered for VAT on this basis, and was able to claim back VAT paid on CPL and FI training services in the previous six months and goods over the previous three years.
Things have gone roughly as planned and I am now self employed but, as I suspect is many people's experience, I have only worked for one company (as a freelance, not PAYE). The purpose of my post was to make the point (see mini above) that working for a single company (as a freelance) initially does not rule you out of self employed status, although HMRC would soon be on your tail if it went on for too long like that. They take the view that if it looks like a duck, and it goes on quacking like a duck, then it probably is a duck.
The bottom line is that you need to have the intention to be self employed (technically I think it's the intention to make VATable supplies) to claim the VAT back, and if that doesn't happen (as others have posted), or if HMRC think you are taking the piss you will be liable to pay back what you have reclaimed. Now obviously there's a bit of a grey area in your intentions, and sometimes the dream PAYE job turns up the day after you qualify.
However, I would have though that anyone who does an FI course is almost by definition planning to work freelance, because I don't know anyone who will employ an FI(R) on a PAYE basis. PMs with attached contracts please from all those employers around London who want to prove me wrong !
Hope that clarifies matters. This all happened last year BTW.
Things have gone roughly as planned and I am now self employed but, as I suspect is many people's experience, I have only worked for one company (as a freelance, not PAYE). The purpose of my post was to make the point (see mini above) that working for a single company (as a freelance) initially does not rule you out of self employed status, although HMRC would soon be on your tail if it went on for too long like that. They take the view that if it looks like a duck, and it goes on quacking like a duck, then it probably is a duck.
The bottom line is that you need to have the intention to be self employed (technically I think it's the intention to make VATable supplies) to claim the VAT back, and if that doesn't happen (as others have posted), or if HMRC think you are taking the piss you will be liable to pay back what you have reclaimed. Now obviously there's a bit of a grey area in your intentions, and sometimes the dream PAYE job turns up the day after you qualify.
However, I would have though that anyone who does an FI course is almost by definition planning to work freelance, because I don't know anyone who will employ an FI(R) on a PAYE basis. PMs with attached contracts please from all those employers around London who want to prove me wrong !
Hope that clarifies matters. This all happened last year BTW.
Last edited by puntosaurus; 9th Feb 2006 at 16:46.
The Original Whirly
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As I've said before on here, I was self-employed as a freelance writer before I started my CPL training. I was well below the VAT threshold, but registered for VAT (I had to register my writing business and my future helicopter pilot business) to claim back VAT on training. When the VAT helpline phoned me, I was totally honest, told them what I had done and why, and asked if it was legal. I was told it was, and given advice as to how much I could backdate and so on. The VAT people aren't ogres; if you want to know if you can do anything, phone and ask them! And the forms are easy-peasy to fill in; you might need an accountant at the start, but after that it's just a quarterly mini-form, and you get your hard-earned dosh back - can't be bad.
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VAT on training
A quick VAT question
The discussion about VAT invariably pops up with prospective commercial pilots. I am able to outline the basics about voluntary registration as a sole trader, back dating registration if necessary, time limits on claiming back goods/services already paid for etc (and of course recommending they employ the services of a good accountant or at the very least the VAT helpline).
However, the one point I can't offer any general advice on is if you wish to remain employed. Can anyone - in very vague and general terms - explain:
1. If it is possible to register as a sole trader and still be employed; and
2. If it is not possible as a sole trader, is there another route that can be used to reclaim the VAT?
I appreciate that it is a very complicated subject so I'm just after the basics
Many thanks in advance
The discussion about VAT invariably pops up with prospective commercial pilots. I am able to outline the basics about voluntary registration as a sole trader, back dating registration if necessary, time limits on claiming back goods/services already paid for etc (and of course recommending they employ the services of a good accountant or at the very least the VAT helpline).
However, the one point I can't offer any general advice on is if you wish to remain employed. Can anyone - in very vague and general terms - explain:
1. If it is possible to register as a sole trader and still be employed; and
2. If it is not possible as a sole trader, is there another route that can be used to reclaim the VAT?
I appreciate that it is a very complicated subject so I'm just after the basics
Many thanks in advance
Hovering AND talking
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1. It is possible to be both self-employed and employed but HMR&C will want to make sure that any "joint" costs are fairly proportioned between the two businesses.
2. Highly, highly unlikely. In fact, I would say "no" but I have heard of people who claim they have done it. I am sceptical. All I can say is that they were dealing with an Inspector who didn't know the rules and that is also unlikely.
The point with VAT is that it is a tax on the end user. If your customer is someone who can reclaim and pass on the VAT to an end user, then you can easily obtain VAT registration.
However, the self-employed route also has some income tax advantages especially when it comes to claim tax on job-related expenses and so HMR&C are quite strict on whom they regard as self-employed and whom they do not. Some cases will go to the Commissioners. However, I do understand that they "turn a blind eye" to flying instructors as it is appreciated that that is how the industry works.
Cheers
Whirls
2. Highly, highly unlikely. In fact, I would say "no" but I have heard of people who claim they have done it. I am sceptical. All I can say is that they were dealing with an Inspector who didn't know the rules and that is also unlikely.
The point with VAT is that it is a tax on the end user. If your customer is someone who can reclaim and pass on the VAT to an end user, then you can easily obtain VAT registration.
However, the self-employed route also has some income tax advantages especially when it comes to claim tax on job-related expenses and so HMR&C are quite strict on whom they regard as self-employed and whom they do not. Some cases will go to the Commissioners. However, I do understand that they "turn a blind eye" to flying instructors as it is appreciated that that is how the industry works.
Cheers
Whirls
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Thank you Whirls.
So it is possible, for example, for someone to continue their day job and be a freelance pilot on the weekends, and be registered as a sole trader purely for the purposes of their flying? My confusion arose because I thought that by registering as a sole trader whatever services you provide you have to charge VAT on them.
Or the more common scenario of maintaining current employment whilst training, but still wanting to reclaim the VAT on the flying which will stretch beyond the 6 months (I understand there is a little bit of discretion here)
So it is possible, for example, for someone to continue their day job and be a freelance pilot on the weekends, and be registered as a sole trader purely for the purposes of their flying? My confusion arose because I thought that by registering as a sole trader whatever services you provide you have to charge VAT on them.
Or the more common scenario of maintaining current employment whilst training, but still wanting to reclaim the VAT on the flying which will stretch beyond the 6 months (I understand there is a little bit of discretion here)
Last edited by mongoose237; 22nd Mar 2006 at 23:03.
Hovering AND talking
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No, that scenario is perfectly possible as long as expenses for job and self-employment are kept separate.
For example, my day job is as an accountant. I could, and do, remain as an accountant whilst training for CPL. I am an employee as an accountant but can register as self-employed "future" heli instructor. All my heli instruction work would be liable to VAT to my customers whereas I could still continue to be a part-time employed accountant.
Cheers
Whirls
For example, my day job is as an accountant. I could, and do, remain as an accountant whilst training for CPL. I am an employee as an accountant but can register as self-employed "future" heli instructor. All my heli instruction work would be liable to VAT to my customers whereas I could still continue to be a part-time employed accountant.
Cheers
Whirls
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OK, so provided you only claim back VAT on expenses incurred in the provision of services for which you charge VAT on, Her Majesty is happy.
This is now curiosity, seeing as I'm talking to a professional
Take for example a salaried offshore pilot, who in his copious time off fancies doing some onshore flying. Would they be able to be registered as a sole trader, or are the employed services/self employed services so close that they are considered indistinguishable?
I'm guessing theres no definite answer to that, depending on the mood of the inspector!
This is now curiosity, seeing as I'm talking to a professional
Take for example a salaried offshore pilot, who in his copious time off fancies doing some onshore flying. Would they be able to be registered as a sole trader, or are the employed services/self employed services so close that they are considered indistinguishable?
I'm guessing theres no definite answer to that, depending on the mood of the inspector!