Has anybody any experience with the Inland Revenue regarding claiming course costs as part of their self employment (freelance) work??
I have just had an old tax return assessed and been told that I cannot claim my FI course as expenditure in line with my self employment as it teaches me a 'new' skill.
I am in the process of appealling the decision (especially as they want some cash back) and wondered if anyone out there had any similar experience/ help/ advice??
Not had experience of them in regards to a Self Assessment, but have with VAT (after a recent inspection).
They allowed me to reclaim that on an "intending trader" basis (I don't have a CPL / FI yet); but they will be back out in 2.5 years to re-inspect and they will expect to see revenue generating invoices by then.
I was really shocked by this, as I expected them to demand the whole lot back (obviously I would have put up a fight; might as well make them work for their money!). My accountant said that it was likely they accepted it as it formed part of a wider business rather than being on its own; and that the 2.5 year re-inspection was because their own guidelines prohibit them from taking enforcement action on information they have been aware of for more than 3 years. So, when they come back out, unless I am an FI by then I will be paying it all back I expect.
Sorry I can't provide more useful specific advice; but I would always advocate appealing as far as you can - they generally then take a more realistic approach. Also, they start to way up the cost of enforcing their decision against dealing with an appeal and/or accepting any proposal you may wish to make (a relative did this and got a £10k demand reduced to £4k).
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Income tax and VAT rules are quite different; training can be allowable for one and not the other.
Generally, training of this kind is not allowable for income tax whereas it is for VAT. However, I have heard of people (possible apochryphal tales) getting training allowed. I would recommend that you see a qualified tax accountant (and that ain't me!!!) to understand the grounds for the appeal.
TorqueTalk, my accountant's advice is consistent with the advice you've been given, ie training for new skills is not allowable as an expense, but recertifying old skills is.
With some arm twisting I persuaded my accountant that the CPL course was recertifying PPL skills to a higher level of tolerance. Type ratings were also a fairly heated debate but I won that one too, since I was able to argue that the flying skill was being recertified on a different machine. Unfortunately, I lost the argument about the FI course ! I just couldn't argue credibly that it was any kind of recertification.
My annual IR renewals, LPCs, medicals all get put through under allowable expenses though.
HTH
PS I did this through a Ltd Co. set up for the purpose.
Just to clarify - It is my personal (self assesment) tax return that i'm having issues with and not VAT.
Senior pilot - thanks for the links. I'll wade through those when my head stops spinning.
Whirlygig and Puntosaurus - I think you may be right. The opinions that i'm getting from a variety of sources seem to concur with what you said. That being the case, there does appear to be the odd case that has gotten through the net, but I think they're probably the exception to the rule.
Jemax, you can try it on with your accountant, but based on the principles above, No. It's a new skill, and therefore not allowable. Your annual renewals are though.
Alternatively, you could give it a shot anyway, in which case I would put any tax saved in a six year high interest rate bond !
Depending on the rates you use there is a cunning strategy for the heli IR that may save a little money AND allows some of the expenses to be offset against taxable income. IMHO it's a more gentle (if longer) and lower risk training pathway also.
If you do your IR on a single engine fixed wing first (even if you have to do a full fixed wing PPL first) then convert it to a ME helicopter according to my calcs you're close on cost. Then you can claim the conversion as recertification of an existing skill on a new machine which makes the composite route cheaper.
Tada !
Actually, the case is pretty marginal if you have to do a full fixed wing PPL, but quite compelling if you've already got one. The rates I used to make this case were Heli FNPT I £250/hr, FNPT II £350/hr, ME heli £1000/hr, and Fixed wing FNPT1 £150/hr, FNPT II £200/hr, SE fixed wing £250/hr. I've no idea whether these are right, but they're in the zone - fill in your own figures and see for yourself.
Last edited by puntosaurus; 12th Dec 2007 at 10:38.
I created a VAT registered Limited company as a freelance CPL/FI. Managed to reclaim about 70% of the VAT on all my training costs.
As the Director of my company I took out a personal loan (company funds were insufficient) to fund my IR (a skill being offered to a company employee to expand company business). Reclaimed the VAT on the IR and then used company profit to repay the loan
Had two inspections from HMR+C and had no problems on either, after I'd shown the higher income being generated with an IR had allowed the company to progress.
Maybe I was just lucky, all I did was talk plainly to the HMRC bod/s when they visited and showed them the trading records and receipts I had.
Actually, before I paid any tax. Not an accountant, but I've told two field inspectors whats happened and both have been satisfied And it was over a year ago
Thanks interesting angle, I have just been having the debate with my accountant ref setting up as limited company, plus it may help with protecting the extent of my personal liability should any issues arise.
