Can you reclaim the VAT and/or tax on training costs?

[DanielSten]

Hi, I want to ask a question that will hopefully clarify everything if someone can answer the question.

I want to become a Helicopter pilot and I want to take the following courses, PPL(H), CPL(H), ATPL(H), FI(H) and IR(H). Possibly also some type ratings and of course some hours of training time as well as groundschool and books.

To reclaim the VAT on this I need to look at myself as a self-employed, correct? This is convenient as I want to start of as a instructor and therefore will be paying VAT in the future. Should I register for VAT before commencing the courses and keep the school I'm training at sending invoices and I keep paying and reclaiming VAT after each invoice?

It will probably be like one big invoice for PPL(H), CPL(H), ATPL(H) and FI(H) and after that it will be smaller for hour-building and for the IR(H) later on. For this I can just keep reclaiming VAT each quarter for the invoices I've recieved, correct?

I just want to clarify this since I want to become a helicopter pilot and the best way is to start of as a self-employed. Also, do anyone know if there's any problem being a non-UK citizen but still european? What do I need to fix before registering for VAT?

Best regards and safe flying,
Daniel

[Whirlygig]

If you are a non-UK, EU citizen and want to train and later work in the UK, get a professional accountant who understands both Swedish and UK taxes. Do not rely on any advice on here in this circumstance.

Cheers

Whirls

[staywet]

Just to clarify regarding what might happen if , having reclaimed the vat on training costs, you go straight into an employed job (lucky you). I understand that if you still have any vatable product in your company when you cease to trade, you are required to repay the vat. Therefore a self employed pilot still has the product (his training), he has not sold a single piece of it. The vat man could take the refunds back.

I dont think there would be a penalty as thesystem allows simply that the business pays back the vat on any unsold product that remains in the business upon cessation.

Is training the same as the product?

[Whirlygig]

The vat man could take the refunds back.

Yes, and they have the right to charge interest at the official rate.

Cheers

Whirls

[staywet]

I am not so sure about them charging interest or even a penalty unless you have been careless or deceptive. In the case of simply ceasing to trade, you only have to repay the vat that you have claimed for items still in the business at the date of closure. So, a shopkeeper will have to pay back vat on their unsold stock. A pilot may have no unsol stock but he may have a helicopter or share, a van, sundries etc and a vat calculation may be required proportionally. The question is whether the training that has maybe had £15-£20,000 of vat refunded, still remains 'unsold' and then has to be paid back? Or, if the pilot has invoiced £100,000 of work over say 6 years, he will have repaid the revenue back £20,000. So, at what point does the vat not require to be repaid, if at all?

I would say though, who cares if after spending £100,000 on training and then getting a full time job flying, would anybody care that they might have to repay the vat man?

So anyway, is vat refundable on modular training?

[Whirlybird]

So anyway, is vat refundable on modular training?

It certainly was when I did it in 2001/2. I had an accountant who prophesied doom and gloom, but I'd been told it was OK, and I went ahead. I then got a phone call from the VAT office, checking that I was OK with all the forms etc. I asked them directly if claiming back VAT on helicopter training was legal. They said you could do that on some types of training but not others and..."Helicopter flying. I've not had that one before. Hang on while I look it up......yes, it's fine for you to claim back the VAT on training costs for that."

And, for the record, you don't need to be a limited company or anything that complicated; I was simply a sole trader - Whirlybird, Helicopter Pilot.

[staywet]

Thanks whirly. Thats what I understood. So post 136 is misleading.

[photex]

Not as simple as that now.

Just been through a long and tedious battle with the HMRC on this and didn't win in the end. Others have done it in the past but I think they've picked up on this now. You may be able to claim back some CPL costs once you have trained AND are self employed but as far as I can see now you will not be able to claim the VAT back on training flights as you go along.

As a bit of a warning to others, I paid the school I was training at a sizeable amount of money to help me do what is mentioned above. They claim in their 'Career Seminars' that lots of people have done this before and is relatively straightforward. However, when it came to the crunch they took my money and weren't much help at all, when HMRC started asking questions.

When I asked for some of this 'consultation fee' back my emails and calls were ignored. This is not a small training company either. Unbelievable.

[Johe02]

I went to court over this and almost won - the outcome was I was able to claim VAT on training up to three years preceding my first invoice for flying.

Fair enough looking back but I would have certainly got my act together a bit more had I known before the fact.

[staywet]

So what would you differently? What training costs were you able to reclaim after the first flying invoice?

The thing is, the 17.5% spread all over the training of CPL FI amounts to either running out of money or just having enough to qualify sufficiently to get to raise that first invoice.

We maybe have to rely on those refunds in order to fund progression.

This is such an important topic that something better than rrumour needs posting.

[Whirlygig]

This is such an important topic that something better than rrumour needs posting.

Agreed but all people can do here is post their personal, and historic, experiences.

Instead of hoping for free advice here, why not pay a visit to your accountant.

"One does not value what one gets for free".

Cheers

Whirls

[500e]

Whirl
Although that's what I did, your comment sounds like regression to me, more flying required

[Whirlybird]

Phone your VAT office and get the facts; a lot of accountants don't know about this.

[staywet]

Maybe it also depends which vat office. Otherwise why do some seem to "get away with it". Surely its either its allowed or it isnt. I spoke to another school today, and the question got "well its a bit of a lottery, some get away with it others dont". I bet the vat man says "speak to your accountant".

[Whirlybird]

staywet, unless things have changed in the last few years, there's a specific VAT Helpline number to call, and they should be able to tell you. But you need to be clear about what you're asking...write it down first. It isn't a question of getting a way with it; it certainly used to be well within the rules.

[staywet]

I phoned the vat helpline today. Training costs are reclaimable as long as you intend to make vatable supplies. I explained that the training costs could be between £60,000 and £100,000 over three years, but vatable invoices relating to actual flying activities would be at least a year off and very slowly increase as additional training continues. I explained that some commercial work may happen after one year and maybe additional flight instructor work some months later. But it could take six years before meaningful amounts af vat would be returned to the Revenue.

I was advised that training costs must not be older than 6 months prior to date of registration. There are no specific vat notices relating to pilot training, but he suggested it was no different to driving instructor training. I did not mention that at least a driving instructor already knows how to drive and would the vat on the ppl be reclaimable?

He did not advise regarding potential grey areas but reiterated "intent".

He said that if I voluntarily registered, I would have to charge vat on all my supplies from that date. Therefore if I sell a flying toy anciliary to my piloting invoices, I would have to repay the vat on the toy, even though I had not reached the vatable turnover threshold.

I reckon by selling anciliary things, you are showing intent to trade. But the issue I have now is this. You volunteer to register and start selling goods that attract vat and you are liable to pay this back. Then you get your ppl and cpl and then make a few flying invoices (preferably within your first financial year). Then the Revenue disallow the vat on your ppl, but allow it from your cpl. The question is, if you have voluntarily registered, will you still owe the vat on your sales, even though you neednt have paid them had you waited to register until the cpl.

So yes, time to ask the accountant.......but they wont know and by the time they do the reasearch, you have spent an hour or two of flight hours. So, maybe I should ask the local vat man. But he will give you the party line and not tell you about the tribunals where pilots have won the day.

So, next. A visit to the vat man with a no holds barred list of questions. I bet I dont get definitive answers.

[photex]

Staywet.

Exactly the situation I was in. I was selling helicopter tours, and flight experiences and also did a bit of trading on aviation items. Unfortunately this was not enough to convince the VAT inspector dealing with my case.
Apparently recovering 'training' costs on a PPL is seen as self supply and not counted as training.
If you get your CPL and then register you should be able to claim back everything in previous 6 months, as at that point your are an 'employable' pilot.

I think at the end of the day it's luck of the draw. I just wasn't lucky...

I'll PM you details of an accountant well versed in this type of thing.

[staywet]

So that suggests you should do the hour building after ppl and finish cpl within 6 months, to be able to reclaim about £5000 vat. (if hour building counts as training costs)? Thats not easy, especially as you need to also squeeze in the exams.

So what portions of the training have people managed to reclaim the vat.

1. All of the class one medical (certainly a class one shows intent)?
2. Ground school and exams?
3. Hour building?
4. All of cpl flight training or only 6 months worth?
5. PPL?

[Whirlybird]

staywet,

I registered as soon as I started the CPL, and claimed for everything from 6 months before this. I can't remember all the details, and my AME wasn't VAT registered anyway.

You're complicating matters unnecessarily. The VAT man told you that you could claim for training if you intended to make vatable supplies afterwards. That's it. Why do you want to sell helicopter toys anyway? You're training to be a commercial pilot/instructor. The timescale is irrelevant. Occasionally people get asked for business plans, but the bottom line is that your VAT on training costs is recoverable, at least for the CPL. I'm not sure about the PPL, but why don't you phone the helpline again and ask. At the moment you're being far more devious than the VAT people are.

[staywet]

Come on Whirly....your post is a little inflamatory. I like flying toys, other people sell caps and T shirts. The idea of selling a secondary product is simply a method that would indicate that the trainee pilot is in fact, in business, and not employed as (an accountant for instance) and using some pretence to one day be a commercial pilot, when the reality may be that the pilot is just looking for a way to save the vat on their hobby.

As all accountants would agree, the best way to fund your training is to earn the money, not borrow it. I am simply suggesting a few ways that any trainee pilot can fund (say half of the £80,000) it may take to qualify.

1. Get £15,000 paid back from the Revenue.
2. Get 45 family and friends sponsor an hours training. £13,500
3. Start being a self employed pilot and open an online supporting business offering books, puzzles, jewellery, models, radio controlled helicopters, postcards, trial flights that your instructor can fly, anything else, anything else, anything else. Say £10,000 profit in first year and continuing each year thereafter.
4. Offer..........Oh look......Pretty well covered half by cpl.
5. Use my savings to cover the other half.


One thing is certain, I will be able to show the vat and the tax man that I am intent on building a business around my flying.

As for being devious, I have come onto this site to find substantial advice, and I have pretty well found simplerumours, for what should be a very clear and understood policy. Surely as professional pilots you all should have a clearly defined, understood and court/tribunal tested methodology to deal with these matters. As it stands, pretty well every school I have approached has a very vague idea of the situation which borders on hoping your vat reclaim may be successful, afterall it worked for my last student. Then when you find a student, he says it didnt work for him.

Remember, if a flying school can offer a definitive successful answer that ensures the situation isnt just hoping for a successful reclaim, that school has effectively made their training costs 20% more affordable.

I have suggested a few ideas that might cover all your ppl and maybe all your cpl training costs. Not trying to be devious, just trying to fund the training with the knowledge that what I attempt to reclaim, is reclaimable, and not seen by the Revenue as some clever scheme.

It seems a shame that the best advise from a professional pilots website comes down to "Pay an accountant"......because they dont know either. Or "Ask the vat man" because he wont be forthcoming about the successful cases won by trainees at the appeals tribunals.

So far this thread (for the past 7 years or so) has provided nothing of substance to answer the question. Is vat reclaimable on training costs?......Well yes! Ah, but maybe not. It depends.

So come on someone......Answer the question definitively.

Actually, I would expect to have such questions already defined in the ground school. If you are training to be a commercial pilot, doesnt any governing body want its members to be 100% exact with both its flying and its business, in order not to bring the whole profession into disrepute?

I do apologise for the tone of this post, and dont wish to offend anybody.
Its just that there are too many questions. And I am still stuck on R22 or 300c? and that may be the most important question of all.