Tax relief on training. [Archive]

DreamCatcher

9th Feb 2001, 12:25

Hi, Avrodamo (North Yorkshire was always a better force! http://www.pprune.org/ubb/NonCGI/tongue.gif)

One avenue you may consider -

An accountant may give you sound advice on setting up as self-employed, offsetting aviation costs against expenses, and particularly getting VAT registered on a voluntary basis to reclaim VAT.

But you'd need to demonstrate to the VAT man that you were running (or hoping to run) a business (even training costs count).

Just an idea.

Cheers

------------------
If you're not on the edge, then you're taking up too much space.

foghorn

9th Feb 2001, 13:53

I thought about this a while ago. I already have a limited company that I could use which is VAT registered and trades in the IT sector.

If you did pay for training through a company, you could offset the whole training cost against tax and claim back the VAT. You could even claim reasonable expenses during the training against tax.

I spoke at great length to my accountant about this, and his advice was not to go ahead: he said he would be very surprised if the Inland Revenue would allow the training to be tax-free, as it was obviously training in a different sector to that which the company is trading. Even though any training which 'enhances the earnings potential of the company' is tax-deductable, the Revenue have seen most tricks before, and if they don't like it, it's up to you to prove at a tax tribunal that it is genuine.

If you did go ahead and do this, and the Revenue didn't like it, they would judge that you personally had a 'benefit-in-kind' from the training, and tax you as if that money had been paid direct to you. Customs and Excise would also want their VAT back as well. Net result: no gain. The Revenue is also getting tougher with people who they think are really trying it on, and might want to bring charges against you: the law was made tougher recently regarding tax-evasion.

If you don't already have a company that is trading, you can't just set up a company to pay for your training, as this is a 'Sham Company' and that's illegal.

Anyway, in the end I decided not to go ahead with this: my personal tax situation is in enough of a mess with this whole IR35 fiasco, basically allowing the Revenue to turn round at any time in the next seven years and say I owe them a sh!tload more tax: adding extra indecision from expensive training sat on the company's books that may or may not end up a benefit in kind would be too much for me.

Dizzy

9th Feb 2001, 23:26

Dreamcatcher:
Sorry, but Hampshire was always the best force, until the government started meddling with Europe. Then Europe started meddling with the government - now all is a pile of poo!
But here is not the place to vent my anger!

"I am going to enjoy this!"

KnightOnTheTownUK

12th Jun 2001, 17:40

Lifted this from an article on the internet:

(Can anyone confirm if this is true, or is it already taken into account when you are billed by the training college??)

"....NVQs and Tax Relief for Commercial Pilot Training

note: see NVQ page for latest news

While the cost of paying for your CPL/IR training can undoubtedly be a major concern, help may be at hand in the form of tax relief to the tune of 23% (or 40% if you’re in the higher tax bracket). This is applicable on any flight training towards a CPL/IR as the training is in line with the current National Vocational Qualification (NVQ) scheme. NVQs can be applicable to any number of training courses, from catering to shop retailing to learning how to be a commercial pilot. It refers to a series of levels of competence which, once completed can, according to the level achieved, result in a qualification considered equal to a senior management position. With the CPL training curriculum falling into line with existing levels of NVQ assessment, the tax relief becomes available.

Of course, there are certain criteria which must be met before application for tax relief can be accepted. These include that the applicant must be a resident in the UK for at least 183 days a year, isn’t entitled to any other tax relief and isn’t only undertaking the training for recreational purposes. What this means is that if are applicable you will only be required to pay 77% of your training fees, with your training college able to claim the rest back from the Inland Revenue.

For further details of NVQ tax relief, either contact your training college or the Aviation Training Association on 01494-445262. ......."

What do you think??

bow5

12th Jun 2001, 17:48

As far as I know it used to be the case but is no more.

Would be very interested to know.

little red train

12th Jun 2001, 18:17

Long gone.. sorry.

pointless amount of paper work to achive a HND in 'flying stuff' only usefull if you wanted to go on for a uni degree. didn't take into account that the CPL/IR at the end of it would be proof itself you had dont the work. another bit of daft goverment publicity, when commercial flight training should be regarded in its own right as a qualification.

TheNavigator

12th Jun 2001, 18:27

I saw something about this issue in IR119 which I have a copy (althougt I cannot find it anymore in the IR website) which states that when the NVQ cannot be applied there is what is called an "alternative route" which effectively works exactly in the same way as the previous NVQ scheme. I cannot provide more details now, but I can provide the text later on if that is of interest. There is also a number to call for more information. The only thing I remember is that it applies to over 30's only and for full time or substancially(?) full time study.

Anyone heard of this "alternative route"?

TheNavigator

martinf

12th Jun 2001, 19:39

Aahh.....the benefit of hindsight.

What I could do with NVQ!!

Whirlybird

12th Jun 2001, 21:53

Navigator,

As far as I know what you are referring to is VTR (Vocational Tax Relief) which has also now gone. If it really has been replaced by anything else I'd love to know about it, but sadly I don't think so.

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Whirly

To fly is human, to hover, divine.

low flyer

13th Jun 2001, 01:09

I remember something about this Navigator. Yes it was for over 30s and the course had to last over 2 weeks and (I think) under 6.

Best bet would be to ring someone like OATS and ask - they're sure to know of any tax dodges to bring down th efees and attract more students.

TheNavigator

13th Jun 2001, 03:39

This is what I found about this issue. Aparentely one of the exclusions of this new system is precisely Pilot Training. Very unfortunate this is ....

As the new national system for Individual Learning Accounts is introduced, Vocational Training Relief (VTR) is to be withdrawn with effect from 31 August 2000. Payments made upto and including 31 August 2000 will be eligible for relief. Payments made after that date will not be eligible.
Further information about Individual Learning Accounts is available on this website or by ringing the Individual Learning Account Centre
on 0800 072 5678. http://www.dfee.gov.uk/ila

Anybody thought of starting out an activity as a self employed and getting relief from the training provided for the exercise of the profession?

[This message has been edited by TheNavigator (edited 12 June 2001).]

AirScream

13th Jun 2001, 12:13

TheNavigator, it sounds like you feel the same way I did when I realised that VTR2 had been disbanded. It was one benefit of being 30+. I too looked at the Individual Learning Account system and indeed now have one! But what is it worth? I have yet to find the answer to that one.
Not wanting to get political but the removal of the Tax relief is discourages personal development, something that was well touted in the "education education education" blah.

So tax relief has gone - we get over that.

ILA's are here - they specifically ban "flying lessons" so I accept that the government won't hire the aircraft and instructor but are you sure that it really bans "Pilot Training". ie ground based theory, exam fees etc toward a commercial licence?

The other problem is finding a training establishemnet that:
1) Has heard of ILA's
2) Has done anything about it to enable you to get a discount.

Has anyone used an ILA to any effect in the aviation world?

Is it not in the interests of the ground schools to make their expensive training courses accessible to more punters? Even if it is a "mere £150" I recall a few years ago almost every advert had some mention of NVQ discount but today there is no mention of ILAs.

Whirlybird

13th Jun 2001, 12:15

Navigator,

I'm doing just that. I'll be filling in all my expenses for the last tax year, and asking that they be offset against future profits. My accountant says that should be OK, but advised against offsetting them against current profits from my other business (I'm self-employed anyway at present). The reason is that if I either don't get work or am not self-employed as a pilot in the future, the IR may claim back their due with interest!

I've also VAT registered so I can claim back the VAT paid for training. Most helicopter students seem to do this and I even phoned the VAT helpline who said it was fine.

The snag is that none of this may work if you're not likely to become self-employed and earn something eventually. Most helicopter instructors are classed as self employed - but I'm not sure this is the case in the f/w world. Worth looking into though.

------------------
Whirly

To fly is human, to hover, divine.

Cypres

13th Jun 2001, 20:38

Whirlybird,

Can you elaborate on how you go about becoming VAT registered.

Thanks in Advance

Cypres

Whirlybird

14th Jun 2001, 00:40

Cypres,

My accountant had the forms and is helping me with it. But if you ring the VAT Helpline, 0845.010.9000, they can answer any questions and send you everything you need. You can backdate training expenses for six months too - they volunteered this information when I asked about it; they're very helpful. Better than my accountant in fact; he's a bit vague on VAT - especially for helicopter training!

------------------
Whirly

To fly is human, to hover, divine.

india_bravo

15th Jun 2001, 01:08

We wouldn't be in this situation if Gordan Brown hadn't abolished NVQ and VTR for professional pilot training.
So who was it that voted them back in last week ?

Base leg

15th Jun 2001, 01:13

NOT ME !

AirScream

15th Jun 2001, 13:39

Nor Me! Funny how you never meet a labour voter! It seems the only ones that openly declare it are soap-dodging vermin!

"Education Education Education" they Bliared.

It is not just Pilot training that has been hit by the axeing of Vocational Tax Relief.

ManchesterTMA

15th Jun 2001, 21:02

The other little bombshell is that for those that paid before the 31 Aug 2000 deadline to get the NVQ but intend to undertake the training after that date eg money on account with a training provider - THE TRAINING HAS TO BE COMPLETED BY 30 JUNE 2001 - thats about 2 weeks off. Otherwise the NVQ on training after that date is ineligble and your training provider will have to refund the Inland Revenue for any tax relief on your account, which they will take from you!

This has been checked with the Inland Revenue VTR section!

MTMA

Desk-pilot

19th Aug 2001, 12:18

I'm considering an Ab-initio ATPL soon and am wondering if it's possible to set up a company VAT register deduct the cost of the course from this year's income tax bill (I am currently employed full time) and get the VAT back as well. If this is possible then it could save thousands of pounds!

Have I just saved us all a few bob at Mr Blair's expense of is there a reason why this can't be done??

Any accountants out there care to comment?

Desk-pilot

Whirlybird

19th Aug 2001, 12:54

This is a difficult one. Halfway through my CPL(H) training an instructor told me I could claim the VAT back. My accountant said I couldn't, but to ask the VAT helpline. I did, and they said it was fine. I then discovered most helicopter pilots seem to have done this anyway. I then asked my accountant the same as you; if it's a business, can I claim the tax back? He didn't think so, but said I could try it, but it would be safer to ask to offset the expenses against future earnings. Otherwise they could come back later and demand the money back with interest, if you didn't get a job. Well, I've tried it this year, just sent in my first VAT return, and this year's tax return, and I'm waiting to find out. Ask me next year.

Vfrpilotpb

19th Aug 2001, 15:03

I am led to believe that if you are intending to use the qual as part of your " Business" you can claim all Vat, as well as the training cost against any profit as an expense, seems to have worked thus far for me, on the PPL(H) with the intention of going onto CPL(H).
But only time will tell!! :)

foghorn

19th Aug 2001, 23:21

I discussed this long and hard with several accountants as I run a one-man company. The upshot was that if I could guarantee that my CPL would generate income for the company, I could run the training cost through it and get at least partial tax and VAT relief. However if it transpired that there was no evidence of income generated by the training in the company's books (ie. no aviation-related income), the Inland Revenue and Customs and Excise would view the training as a benefit in kind and tax it.

Although there seem to be a fair few CPL(H)s out there instructing through their own company (which would be justification for ofsetting training in this way), I'm fixed wing and there are relatively less CPL(A)s doing this.

At first I thought I'd suck it and see, however I changed my mind because I figured that the last thing I'd want when I'm skint after I've got my licence is a fight with the Inland Revenue.

Also note that I already have a solvent, established company which has been profitably trading for a few years. Setting up a company just to dodge tax and VAT is illegal as it is a 'sham company'.

Desk-pilot

20th Aug 2001, 19:03

Thanks fellas - sounds as if this might be worth pursuing as I intend to instruct until I find a job after ATPL. Next step find a good accountant I guess.

Appreciate the info.

Thanks,

Desk-pilot

You want it when?

20th Aug 2001, 19:32

Desk-Pilot interesting concept. However here's a couple of thoughts (IMHO) that you may like to be aware of - of course I may just be mucking things up;

1. A company cannot off-set against VAT unless it is VAT registered. VAT registration is only applicable when the company reaches an income threshold (£44Kish?), and cannot be applied retrospectively and therefore all VAT incurred on training whilst the companies income is below the threshold cannot be applied.

2. If you were going to try and use your first income as company income (effectively pay yourself to fly) then be careful that the income is not taxed twice (once as PAYE and once as profit in a company). You can lend the company the money but that doesn't count as income - and you've paid tax on it already and you might wander into a capital gains problem in the future.

3. The inland revenue take a very dim view of one man bands being set up for tax purposes. If you come to their attention in this way they are likely to review your last 7 years earning in their favour. I've been PAYE for the last 5 years - and each time I complete a return I owe them another £500 - go figure :p

4. The only way I could actually see this working would be to use the company as a legal vehicle to reduce some of the incurred costs. For instance - if you created a "training group" with a C152 (e.g.) as it main asset and sold shares to a number of like minded training PPL(a) stude types - then you could reduce your costs - which is after all what you really want to achieve. You'd have to contract with a local school for an FI but you could try and off-set some of the cost by allowing the school to use the airframe when your "group" don't want it.

The only problem with option 4 - would be the high insurance and liability costs incurred. Also one plane operations suffer severely if the asset gets broke.

An interesting option however :)

HomerSimpson

20th Aug 2001, 20:29

You can actually self register for VAT before reaching the threshold. If you pick up publications;
Notice 700/12
Notice 700/21
Notice 700/1
Notice 700/15
Form VAT1
Notice 700

These will give you the details of becoming VAT registered and what its all about. You can request these from 0845 010 9000.

P.S The threshold is now £54,000

Regards
Homer :D

Desk-pilot

29th Aug 2001, 10:58

I have just been scanning www.avasp.com (http://www.avasp.com) and came across something called VTR2 (Vocational tax relief 2) Apparently you can qualify for tax relief if you can comply with the following:
You must be aged 30yrs or older
You are expected to train full time
Your training must last for a minimum duration of 4 weeks and a maximum duration of 12 months
You must embark upon a professional course of training with a view to working within the industry thereafter

If this is true you lot owe me a beer! I'm going to try and phone the IR today

(Anything to stop Prescott having more money to waste on traffic calming and speed cameras!)

Desk-pilot

Wee Weasley Welshman

29th Aug 2001, 11:34

VTR was a lovely little scheme that Brown killed off on a budget day 3(?) years ago under some tripe about "closing loop holes for private pilots to claim tax relied on their hobby"... Grrrr!

The IR changed the rules that the NVQ4 in Piloting of Transport Aircraft was no longer recgnised for the purposes of VTR. VTR2 was simply the same scheme for higher rate tax payers - most mortals came under VTR1.

There was a scrabble a while back by various schools to 'attach' some element of - say - airline managament & economics onto ATPL courses. This was largely rubbish but could in some circumstances be classified as vocational training able to attract VTR still (Vocational Tax Relief was still available for all sorts of other trades and professions).

The beauty of this work around is that the school can charge - say £500hr for the 'airline management & economics' lessons. And then for the rest of the course £5hr for the ATPL groundschool proper... hence you get VTR on 90% of the COST of your course based on perhaps 5% of the actual LESSONS.

In this manner VTR in flying training continued to exist to some degree and I gave out full details of this advantageous scam at the time.

However with the implementation of JAA it all died a death. I would be suprised if you will be able to claim anything under VTR2 for JAA commercial training. However, it is always worth talking to the tax man as your personal circumstances may allow some room for manouvere.

Some people used to register themselves as a sole trading company engaged in some kind of flying business and then were able to claim hours building and materials as a business expense attracting VAT relief. However, this is a minefield and you should seek professional advice. I think the savings these days a minimal due to the move from hours to approved instruction.

Best of luck and do keep us all informed,

Cheers,

WWW

daay41126

27th Dec 2001, 13:37

anybody any views on the nvq and ppl h, cpl h, i am slowly hour building and studying cpl exams but with slow progress due to jar caa exams etc etc

Polar_stereographic

27th Dec 2001, 14:34

Where did you hear that?

TRIMTRABB

27th Dec 2001, 15:33

The thread title does not reflect the content????

Polar_stereographic

27th Dec 2001, 15:44

TRIMTRABB,

I spotted that. My question was to the title. I've ignored the content as I do not see where it fits in.

PS

TRIMTRABB

27th Dec 2001, 15:52

Yeah, come on daay41126. This title will make a lot of people jumpy - whats it all about?

TRIMTRABB

27th Dec 2001, 16:21

is this a rumour thats started as a result of the ILA situation -

Quarternion.

27th Dec 2001, 17:16

As I understand it NVQ was available up to the end of last tax year. Any flying training up to that point was VALID for NVQ.

Any money paid before and used after the end of the last tax year is NOT VALID for NVQ and according to a Revenue statement (issued some months ago) will require this to be refunded.

I did remember reading a copy of this statement...

I'm currently looking for a copy of this to show you it is not rumour but fact.

TRIMTRABB

27th Dec 2001, 22:56

Quarternion,

Thanks for the clarification. I thought this was potentially yet another kicking in a continuing 'trail of bad luck'! -

TT

Fly_146

28th Dec 2001, 01:45

Yes, any training for which you claimed NVQ tax relief but had not completed by June 30th 2001 may be claimed back from the tax man.

I know of many who claimed tax relief for all their training at the time of abolishment, and have yet to complete. This could potentially cost 1000's.

<img src="eek.gif" border="0">

George Tower

11th Nov 2003, 23:33

Can the cost of professional training be offset against your income tax when you start working as a pilot?

The reason I ask is that like most of the people reading this forum I'm going to be left with a rather large debt when have my shiny new fATPL and so I'm thinking of ways to alleviate the financial burden.

Im sure in the days of old when airlines sponsored cadets, the training costs incurred were considered company expenses. So in this day and age when we're all paying lots of money for our training (most of it borrowed) surely we should be allowed to offset this against the income tax we would pay as soon as we have our first flying jobs?

Has any one tried this getting anything back and if so with what success?

WND123

13th Dec 2004, 17:22

Does anyone have an understanding of the applicable tax law regarding flight training?

I assume that it is not an allowable expense against schedule E income but has anyone ever tried to put there training costs into a company and get some money back from the revenue that way?

Any suggestions??

WND123

variablepitch

13th Dec 2004, 17:34

I was told that if you could show that you will be flying clients around as part of your business then you could at least claim the VAT back - not sure about any tax breaks though

aces low

1st Feb 2005, 07:55

I have recently been offered a job with an airline on the condition that I pay for a type rating. I was wondering whether the Inland Revenue would see any part of this as being tax deductable? To make matters clear, I would be an employee (not self-employed or freelance) only working for one company. I don't think i would actually be an employee until completion of the rating...if that makes a difference.

Does anybody out there in PPRuNEland have any ideas or similar experiences?

Thanks

father murry

1st Feb 2005, 09:58

Yes there is tax breaks available. As you would imagine those guys up there that run at Oxford are on it all ready.

They have arranged tax breaks for the APP student they are sending down to Excell to do self funded type ratings.

The cheeky buggers are are even bunging aload of their APP students initial fATPL training on to the tax man as well!

Im sure Gordon and his mates will be on to it pretty quick just as they were when we used to get NCVQ relif on our flying.

Ironic isnt it - us Modular guys are now subsidising Oxfords APP graduates Initial fATPL training and Type training through our taxes!

aces low

1st Feb 2005, 10:09

Funnily enough, balpa's tax advisor reckons that the training required to get the job would not be tax deductable...otherwise all university students could claim that their education was essential in getting certain jobs. Gordon would be very upset then!

I wonder what the score really is?

Dan Winterland

1st Feb 2005, 10:23

Part of your problem lies with the fact that if you are paying for your type rating with a UK company which you will subsequently be working for, the company will claim back tax relief on your training at the full corporate rate - so the tax relief will be going to them and not you.

This is common. All airlines in the UK who charge you the full cost of your type rating are actually making money out of you when it comes to tax paying time. Sounds unfair - that's because it is! But the pilot workforce have only themselves to blame as they are only too willing to pay for their own training to get that first job.

I look forward to the time when demand outstrips supply again and this sharp practice ceases.

Bealzebub

1st Feb 2005, 11:32

You cannot claim for expenses that put you in a position to undertake or obtain that employment. You could claim for expenses that are incurred wholly, exclusively and necessarily in carrying out that employment.

What this means simply is, if your current employer ( not future employer) requires you to carry out a type rating for which they will not pay, then you are eligible to submit a claim for the costs of doing so which the revenue may accept are wholly and exclusively incurred in this sole pursuit, and which are absolutely necessary.

If you are offered employment on the condition you obtain a type rating at your own expense, that does not qualify. This would be an expense that was incurred to enable you to be in a position to obtain employment.

I will try and find the exact wording on the inland revenues website, but you can ask your local revenue office for more details.

Dan.
Those companies cannot actually do that. If what you are suggesting is they charge an individual the full cost of providing the service, and then subsequently claim back from the revenue the same amount as an incurred business expense. That would likely be fraudulant. If they subsidize the cost, or claim the allowance for the accepted provision of the business services that is a different matter. Of course the individuals contribution would also be considered as income to the business, and treated accordingly for tax purposes.

father murry

1st Feb 2005, 12:06

Im really not that clear. How are Oxford Aviation and Excell able to save the APP graduates Tax on both the cost incurred in getting the b 737 type rating and Jet MCC/JOT traning then?

atyourcervix73

1st Feb 2005, 21:16

The sooner muppets stop paying for traing, the better. Bonding yes, but cash up front, sod that for a job

father murry

2nd Feb 2005, 08:46

atyourc.....

are you working as an airline pilot?

not being cheeky just would love to know.

atyourcervix73

2nd Feb 2005, 15:51

Yes Im a Capt on heavy jets, I hate the idea of all these self funded people, its destrying the terms and conditions of existing aircrew, and its also making a mokery of any company loyalty.

muppet

2nd Feb 2005, 19:26

Bealzebub has it right: I went into this with the tax man some time ago.

The only glimmer of light is that you may claim back the VAT. To do this you would need to set up a company (~£200) and have the course invoiced to that company.

Could save you a bob or two.

Good luck.

father murry

3rd Feb 2005, 09:50

With the greatest of respect Captain at your cervix73 - bollocks then to what you think about us wanabees trying every trick left to us in the book to break into this business.

If shelling out £20k for a self funded type rating gets me in the game to one day become a Captain like your good self i`l do it gladly and to hell with how it effects your salary, pension, terms and conditions and time off - Ive got to eat as well!

atyourcervix73

3rd Feb 2005, 17:16

Father Murray....as a FRESHLY qualified captain......who 4 years ago was scratching around in 152's, and anything else with wings that I could fly, Im afraid your response typifies the "I want it all now!" culture. Dont think for one second that I dont know how it feels to be a wannabe, I had 5 years of it!
Regardless of whether you are 20 something, or the wrong side of 30 (like I am) the simple fact of the matter is this, you pay for your type, your going to be paying for line training, then dont be surprised if you have to pay for LST's, recurrency, and anything else an airline that can see how desperate you are to part with your money will find they can squeeze out of you.
As for how it affects my terms and conditions, that will be negligable, the only person you will penalise is yourself and those in a similar position to yourself, you will be saddled with more debt, a lower salary oh and lest I forget the on-going costs of training. Father Murray, you are the ruination of this industry(along with plenty of other sheep) who if they used a little more common sense, a lot less impatience and foolishness, would in all probabilty get a decent flying job, without having to outlay a penny.
One last thing, if your paying for a type rating, you havent exhausted every trick in the book, all your doing is throwing money at the problem.

:zzz:

Arrowhead

7th Feb 2005, 10:39

No tax deductions as far as I understand. ALthough, once you are rated you can always work for an airline in a tax-free country that wants rated pilots (ie putting it the other way around).

And ignore these other comments... If you believe buying a type rating puts you just 1 year closer to a job, go compare the numbers between instructing for a year, and paying for a rating and then being employed for the remaining 11 months. And I know where I would rather be at the end of the year...

Oh, and not even in America are they paying for recurrent training.

Mosspigs

8th Feb 2005, 13:11

Atyercervix73 and others.

Curious as to what those who are currently employed, who claim to be affected by the Wannabes desire to start on the ladder of employment etc etc are willing to do to help rectify the situation?

If we are all in this together and it is acknowledged that you have a more powerful voice than us, how will you help us to help you?

Will you ballot BALPA? Will you form an alliance and write collectively to the airlines or the Government? Will you lobby the Training / Recruitment Captains whilst down route?

Or as I suspect.............

Will you do nothing!

If anyone actually thinks that paying £X,000s is what we want to do. Think again. I want to be employed for the merits I have to offer the company. The loyalty and professionalism I will show in exchange for the training and a fair wage representative of my experience. Unfortunately, it would appear that market forces don't have a conscience or understand the meaning of sympathy.

Until such times as they do, or the market swings in our favour and whilst humans need sustenance to exist, you will get Wannabes who feel they have nowhere else to turn or nothing else they can do.

Airline profit margins are not huge and they are businesses. I don’t support it, but I understand it.

Soap box away now.

Bealzebub

8th Feb 2005, 14:07

"Unfortunately, it would appear that market forces don't have a conscience or understand the meaning of sympathy."

Yes, welcome to planet Earth.
;)

Mosspigs

8th Feb 2005, 15:00

Bealzebub,

That's my point and I don't whinge about it. Sadly I think is will only get worse in the near future.

However if I were qualified I wouldn't whinge about eroding terms and conditions due to Wannabes wanting to reach their aspirations.

The momentum behind it is too strong to stop and I was merely pointing out the fact that this situation is not the fault of the Wannabes.

But thanks for the enlightening comment.
;)

edge70

15th Feb 2006, 12:29

Hi all.

I am about to start my ICAO to JAR Comm/IF conversion and looking to try to claim back tax towards the cost of training.

I believe that if i open a company for myself and operate as a sole trader i will be able to do this.

Does anyone have any experience of doing this?

Thanks in advance.

Edge70.

powdermonkey

15th Feb 2006, 13:20

I've been registered as a sole trader for years, could I put the cost of my flying training through the books? I wish!!! The tax man would owe me a fortune. I would love to know the answer. Anyone?

FlyingForFun

15th Feb 2006, 13:44

No experience, but it has been discussed here a few times before, so if you do a search you might find something.

The general concensus was that you would have to prove to the taxman that your expenses incurred in training were a necessary part of your legitimate other business - and this is extremely difficult to do.

FFF
------------

edge70

16th Feb 2006, 12:34

Will do. Thanks.

Nimbus5

16th Feb 2006, 12:36

The only known way to get tax relief is if you have a conditional job offer before you take the training. This is the scheme used by Oxford, FTE and CTC Wings with their new sponsorship programmes. These are not available to very many people, but the same concept should work for a Type Rating if you are required to pay for your own to take a job. I haven't a clue how to arrange it yet so you'll probably need to speak to a tax inspector at Inland Revenue to figure out how to do this.

Ropey Pilot

16th Feb 2006, 13:33

a Type Rating if you are required to pay for your own to take a job Had a brief look at this to claim back a lump sum I had to front up for a employer gained type-rating. BALPA accountant said it wasn't a goer.

Basically you are putting yourself in a position to be qualified for a job - which is at your own expense (in the same way as your ATPL was and if you had to go back to nightschool your additional training to understand the ATPL exams etc etc).

The case would be the same if you learned to drive simply because a job required it or any other type of course in any other profession - aviation is nothing special in this respect.

If the company are providing training that would be tax exempt then they would be expected to foot the bill- since you are paying for it it is not tax exempt. They are simply offering you a training course (separate to your employment - no matter how entwined the two seem to you the taxman disagrees).

If anyone has looked at this deeper I would be interested to hear the results, but I think the wording on the 'job related expenses' section of the self asessment form backed up what the BALPA accountant said!

edge70

17th Feb 2006, 10:51

Got this from the tax man:

Provided it is incurred wholly and exclusively for the purposes of the trade or profession carried on by the individual at the time of the training is undertaken, expenditure on training courses attended by the proprietor of a business (either as a sole trader, or in partnership with others) with the purpose of up-dating their skills and professional expertise is normally revenue expenditure, which is deductble from profits of the business.

Are there any comments? I'm no lawyer but sounds like it is possible.

jb5000

17th Feb 2006, 11:13

Hey everyone,

Just a quick point to make sure we know where we're going here. We are talking about deducting the cost against income tax, not VAT.

If you are going full time modular / integrated this would be a fairly pointless exercise as apart from anything you are unlikely to be earning that much during your training to even deduct these expenses from.

As a sole trader you would have to explain why the cost of training is related to your business income to deduct it from your income. If this was not the case you would have everyone writing off groceries / holidays / new surround sound systems as expenses and pay no income tax. If, however, your business was selling groceries / surround sound systems then this would be allowable.

Incidentally the same is true for reclaiming VAT, if it is not a business expense you cannot reclaim the VAT.

What would you say that your business was? You would have to be a self employed pilot to really justify this, but to do that you need a CPL anyway!

scroggs

17th Feb 2006, 11:16

I would suggest that it's not actually legal, though it may be possible if you get it by a particularly dozy tax man (they do exist)!

The fact is that until you are a qualified commercial pilot, you are not in the business and therefore have no legitimate business expenses. You are merely a person undertaking speculative training at your own expense in order to increase your earnings capacity. For a number of reasons (including, I think, the prevalence of fraud), aviation qualifications were removed from the NVQ scheme some years ago. That in itself mitigates against your chances.

If you were an ATPL-qualified contract pilot (as many are), you would effectively be self-employed and thus any training or other expenses you incurred could be oiffset against tax. If you are not earning your living as a self-employed pilot, you have no relevant taxes to offset against. You can't offset your aviation training expenses against your McD's income!

I'd forget it.

Scroggs

Nimbus5

17th Feb 2006, 13:56

This is the scheme used by OAT for their Thomas Cook Cadets, by FTE for the sponsored MCC courses and I also think it is being used by GECAT for some of their Type Rating candidates and by CTC for their Wings Cadets. In addition to the cost of the training, the interest on the loan is also tax exempt.

The problem is you can't set this up on your own, the airline has to be working with you on it. Partly because they must give you the job offer before you start the training if you are to get the benefit. Also, they pay you the tax free salary, so obviously they will not do this without Inland Revenue buying into their scheme in advance.

It is difficult to find out exactly how it all works. The FTOs are very tight lipped. I can understand why; because they don't want their competitors to know how to do this. Even if the number of cadets is low, the advertising value of "sponsorship" is very high and so the FTOs are highly motivated to keep the details to themselves.

jb5000

17th Feb 2006, 15:43

Well this is how I'd imagine they would do it, but I'm only a trainee accountant so don't quote me.

They would probably hold the loan as a company and repay it as if it were their own, only transferring it to you should you forfeit the terms of the bond. The repayments of interest and capital on the loan will be made without paying it into your salary.

They can also legitimately deduct this cost of training as a business expense, thus saving themselves corporation tax in the region of 30% on the cost of your training. Indeed the extra cost of training (CTC wings) on top of your bond will reduce their tax bill.

I doubt that you would ever ever get paid a "tax free salary". There is no reason why you would deserve it. Again when you say "tax exempt" on the interest, I believe you mean that the airline would be allowed the interest as an allowable expense against their profits.

Also you are paid a lower salary while you are working so the airline never really loses out financially if you perform satisfactorily.

I imagine there are various little subtleties that I have missed though!

Ropey Pilot

18th Feb 2006, 07:41

jb500,

If that is the case (sounds like it with my company) can you claim tax back on the outstanding lump sum transferred to you?

If your training enjoyed tax exemption while the company was paying it does the status change when it is tranferred to you? Especially as you could have paid it off quicker and therefore paid the entire loan off with Mr taxman not seeing a penny if the company had chosen to increase your payments.

In fact could you use your entire final salary to pay a huge chunk off the loan (effecively working for free) to dramatically reduce the taxable amount owed if the above doesn't work?

jb5000

18th Feb 2006, 11:45

Hi Ropey,

You're getting into the nitty-gritty details of tax / benefits which to be honest I don't feel qualified to answer, it would just be a bit of a guess.

If you want then PM me and I will put you in touch with someone more qualified!

jb

edge70

18th Feb 2006, 12:25

Hi all.

I hold a South African CPL and have been working on contract in Africa for the last year.
So if i start my own buisness as a freelance pilot then in theory i should be eligible to do the above?
:)

pilgrim flyer

21st Feb 2006, 07:57

Hello

My experience is that the following is untrue:

'The only known way to get tax relief is if you have a conditional job offer before you take the training'

I have just rolled up the costs of trainng for FAA CPL/IR and JAA CPL/FI into startup costs for a company. You can do this for costs incurred up to 3 years prior to incorporation. My company now owes me in excess of 32k, this will increase further this year when I do my IRI, convert my FAA IR and do my CRI and hopefully PPL examiner.

Also I took out a loan to pay for this on which I will get a rebate on interest paid. Finally the accountant chappie has done 2 self assessment forms for 'free'- I'm a formaphobic!

Now the down sides:

1. Cost best part of £200 to incorporate plus nearly £900 for AC to check my totting up of bills from as far back as 2000/1. This was no simple task for either of us with the variable rate of the dollar and price of sushi in LA...!

2. Keeping all those receipts

3. You will need to find sources of income who are prepared to pay your company rather than you. I'm a flying instructor so no probs there, however BA might raise an eyebrow (or 2)....

4. If you register for VAT then these problems are compounded because you'll have to charge Stellios VAT on your wages... I didn't do this cos a) wasn't organised enough and b) did most of the training in USA which is blissfully VAT free.

So, in short- it can be done, is not without cost and works for me. PM me if you'd like details of my accountant chappie otherwise go for a personal recomendation- I got mine from my landlord...!

PF

dynamite dean

21st Feb 2006, 17:33

I am an inland revenue inspector, please do not do this I know who you are Edge 70.....
Regards to Scotland!:ok:

Pack2

21st Feb 2006, 17:56

dynamite dean

I have been trying to contact someone in the tax department for ages but just keep getting put onto the next person who cant answer this question.

I believe there is a case where tax relief should be available. If a pilot is employed by a UK company after the CAA issue a validation based on a foreign ATPL. The said pilot worked for this company for 3 years before the CAA said no more..you will have to sit all the UK exams and pass a flight test for the issue of a JAR ATPL.

As you know the cost of this training is very expensive and ran into thousands of pounds. The pilot was forced to endure the cost of training in order to keep his employment.

Under the provisions of Section 188 (1) Of the Income & Corporation taxes act of 1988 this tax payer should be entitled to tax relief.

I have written letters and made numerous phone calls all to no avail..

What do you think ?

downunder

1st Jun 2006, 17:53

Went to a seminar by the leading UK integrated flight training organisation and picked up on a point that may be useful to some. Apparently if you can get sponsorship (and thats not many) you can claim the tax and expenses back on the training . I emailed the FTO for confirmation and they said the ruling by HM Isp of Taxes allows you to claim the tax and expenses back where you are re-trained and there is a job offer which is conditional on successful re-training. Sure this doesn't apply to all of you but with the Multi Pilot Licence on the distant horizon its a big chunk out of the cost of funding.
So a couple of months ago I wrote to my tax office in Wales and am still waiting for a reply. when your talking 90k all in 30k has to be worth a sniff.

Sensible

1st Jun 2006, 21:16

the ruling by HM Isp of Taxes allows you to claim the tax and expenses back where you are re-trained and there is a job offer which is conditional on successful re-training. So now all that is necessary is to get a written job offer prior to getting any training! Super, anybody know of any companies willing to do that in advance of training?

So a couple of months ago I wrote to my tax office in Wales and am still waiting for a reply. They are probably still rolling about on the floor laughing!

I hate to be negative, but I think that all hope of the taxpayer funding flight training disappeared into contrails around 1998 if I remember correctly! I seem to remember that over the years since, many have come up with plans, hopes and dreams, all which have amounted to nothing. Fraid the taxman takes, not gives in aviation.:{

Groundloop

2nd Jun 2006, 08:59

As mentioned above I think you'll find the "job offer" does not exist.

Most of these new "sponsorship" schemes basically say that you are a good chap/chapess and if there are any vacancies when you complete the course, and get good grades and reports from the FTO, you will be fairly near the front of the queue.

potkettleblack

2nd Jun 2006, 10:48

Could be that the IR was having a bad day (good for the FTO) and issued a bum binding ruling. Remember the binding ruling will only ever be applicable to the person who requested it and for the EXACT circumstances that you outlined to the IR. Deviate from these in any shape or form and it becomes null and void.

Ask the FTO for a copy of the ruling and paste it here so we can read the specifics and try and see if it is applicable in your situation. It might well be that the FTO was being economical with the truth. Good on you for writing to your IR office though.

downunder

2nd Jun 2006, 15:49

Not really bothered if tax office find it funny as have decided to stick too figures up to good old blighty and take my hard earned to Australia rather than waiting for HM Taxes to get back to me. Will post the reply if get one. For the few people who are good enough to get sponsorship and like me would like to have train in the UK to get used to the Meterological conditions the ruling depends on the Tax inspectors interpretation and the companys support. The commercial director of the FTO (near Kidlington no names!) who gave me the information unfortunately was not party to the agreements so have to wait out for the tax office.

VFE

2nd Jun 2006, 15:55

Fraid the taxman takes, not gives in aviation.

Not true. See my final posting here: http://www.pprune.org/forums/showthread.php?t=228634&page=9 ...regarding VAT rebates for FI's and then please feel free to post when you know what you are talking about.

Cheers,

VFE.

jb5000

2nd Jun 2006, 21:52

Guys you should really speak to an accountant who would be able to advise you properly. Starting your own 'business' just to invoice the flying school you effectively are employed by can get quite complicated, search the HMRC website for IR35 and see what pops up.

Again remember the difference between VAT and the income tax that you have paid on the money that you are paying out for your training. It is not really the taxpayer funding your training in any sense of the word it is just deducting your training expenses from your income.

Speak to someone in the know who will be able to advise you properly!

Whirlygig

3rd Jun 2006, 19:38

There may be some confusion here between VAT and Income Tax.

One can, quite legitimately register for VAT whilst training and claim back the VAT. HM Revenue & Customs will expect to see a business plana dn part if this business plan will be that you intend to be self-employed after training. If not, then you may have to repay the VAT claimed back.

Therefore, in the original post, where it is talking about claiming back tax and expenses provided there is a job at the end of it, we cannot be talking about VAT. Therefore, if it is Income Tax then I'd be surprised since I do not believe that Flying Training is one of those qualifications for which tax relief is available. It was abolished I think, of all people, by Norman Tebbitt.

You MAY be able to do it again, if your intention is to be self-employed/freelance after qualification but I would imagine you would need a specialist accountant not just a b0g-standard one like me!!

Seriously, if anyone can post any links or information about this, I'd be grateful because at the moment I am very sceptical about this.

Cheers

Whirls

Sensible

3rd Jun 2006, 20:17

VFE, Perhaps you would care to read and inwardly digest "downunder's" original post at the top of the page and then post further comment when you are having a better day. If you are unaware of the difference between HM Customs and Inland Revenue then I would suggest that you should enquire at the appropriate offices for clarification.

With regards your "crossed lines" reply, I and many others here will be very interested to see a copy of any letter from HM Customs indicating that VAT on the whole of ones training can be recovered.

Lucifer

3rd Jun 2006, 23:26

Sensible - they merged last year and are now "HM Revenue and Customs"

scroggs

4th Jun 2006, 09:34

It would appear to me that most of the information posted on this thread is either out of date, based on rumour or plain wrong. My own experience of running a business suggests that two different tax inspectors will give totally different answers to the same question, so any information you receive second- or third-hand is inevitably flawed and may land you in trouble.

If you are seriously considering setting up any kind of tax-avoidance scheme, take legal advice first. If you are using a third party to do this for you, get an affadavit in writing that what is being done in your name is fully within the law, including references to the tax legislation that allows it. If you're still not happy, send a copy of that affadavit to your tax inspector for his or her comment.

My suspicion is that any such tax-avoidance scheme is not legal for the purposes for which you appear to require it (funding initial training). After a good deal of discussion with the tax people, we at Virgin have had to accept that expenses incurred on our own initial company training (accommodation, travel, etc) are not tax-deductable, though expenses incurred once we are qualified are free of tax (though even this is disputed between two particular tax inspectors!). The full details would make a very long and boring story here, but this precis will suffice to illustrate that your schemes may be unlikely to succeed.

This is a minefield, and your advice must be rock solid - and will therefore be expensive. Do not base any decisions on what you read in an internet forum.

Scroggs

downunder

19th Jun 2006, 10:29

will post the two line reply which refers to the appropriate ruling this pm

downunder

19th Jun 2006, 15:14

The following is a reply from a revenue executive at Cardiff dated 20/05/06 quote:

" Tax relief for individuals on training costs are not normally allowable, the legislation governing this is at section 336 ITEPA 2003. The effect of this legislation is at EIM 32520 onwards.

What you have been told is with regard to training costs bourne by an employer. Details of this can be found in EIM 021210 onwards, EIM 01235 is particularly relevant.

I cannot give you any opinion on the eventual outcome of your finding a sponsor and the tax treatment of any reimbursement without knowing the specific details of that arrrangement."

www.hmrc.gov.uk

downunder

20th Jun 2006, 10:44

had a quick search through the website on Eployment Income and it is possible if it is pre-agreed but not certain. Have a look at :

http://www.hmrc.gov.uk/manuals/eimanual/EIM01235.htm

it starts going into case law and as I have no sponsor and want to be a pilot not a barrister I'm going to leave it at that. Perhaps there is someone out there on the other forums who has successfully been through this.

Good luck the lucky few

StraightLevel

25th Sep 2006, 15:53

Hi there,

Can any of the costs involved with gaining a frozen ATPL / pilots job be reclaimed through the UK tax system as a legitimate expense / cost.

Regards,

straightlevel.

p.s. is this in the correct forum?

Grass strip basher

25th Sep 2006, 16:05

I would hazard a guess as no (unfortunately) otherwise it would be widely advertised. I seem to remember it might have been a few years back but I believe Mr Brown has long sinced closed any loopholes.

StraightLevel

25th Sep 2006, 16:17

Bloody Scots!

As tight as ducks arses!

Anyone else got any definitive information?

Thanks Grass strip basher.

markymojo

25th Sep 2006, 16:22

I asked a similar 'what if' question (not on Pprune I might add) a year back.

It seems that if your training is geared towards you working for yourself (e.g. freelance instructor, etc) then in theory you could set yourself up as a company and claim the vat back.

I'm becoming a little vague from here...

I think you may have to wait until you are actually functioning in some sort of self employed, revenue generating capacity before you can claim it back but there is some leeway in retrospective claims if the period is not too long.

Or if a company is paying for you to become their pilot, then i suppose they can claim VAT back to if they paid for the training.

I should point out this comes from a passing conversation i had with a financial type friend, but hope it helps

Re-Heat

25th Sep 2006, 16:59

Absolutely not unfortunately.

Gordon specifically excluded aviation training from being tax deductible training, and it includes all structures to avoid it such as companies.

Anyone who has achieved tax refunds would be in a very sticky situation if their position were discovered on a tax audit.

Superpilot

25th Sep 2006, 17:26

Interesting... XLA, TCX and TFly (in conjunction with OATS and/or FTE) give their "sponsored" students £1,000 on top of their monthly salaries (to pay off the loan) which they say is tax free. How does that work then?

Whirlygig

25th Sep 2006, 19:18

Please don't be confused with income tax and VAT.

As markymojo says, the VAT can be reclaimable if you intend to set up as a freelance/self-employed pilot after qualification. If you don't you could be liable to pay the VAT back.

You can't reclaim income tax or tax losses for training any more.

Superpilot, to answer your question, where are these companies based? I've not heard of them or the scheme. If they are UK companies, I can't see how it works either!

Cheers

Whirls

Superpilot

25th Sep 2006, 19:41

XLA - Excel Airways
TCX - Thomas Cook
TFly - ThomsonFly

All are UK based charter airlines.

Sad Bloke

26th Sep 2006, 14:24

I have looked into the income tax side of this from a training company / airline point of view and a summary of my conclusions is as follows. Note that I have not looked at the VAT reclaim / self employed instructor issue but believe Whirlygig is right - although I doubt you would be able to claim the VAT back in the first place - at least until you are revenue earning and thus charging VAT on.

The way I believe a tax efficient structure would work is -
1 Student is offered a provisional position with airline
2 Student pays a bond to the airline to cover the cost of the training (no VAT)
3 Student completes training and is given position within airline.
4 Airline pays the student a (normally) reduced salary plus a monthly bond repayment
5 The bond repayment is not income (repayment of loan) and therefore not taxable as income.

Result
1 Student has not paid VAT, airline has but can reclaim in the normal way.
2 Student has had tax and NI relief on course costs.

Note that rules change and any scheme would need HMRC clearance. This is just to show you the sort of hoops you need to go through in order to have a chance of setting such a scheme up. As an individual (no airline contract) you cannot offset the costs against tax.

Looking through all this, what has "really" happened - who has paid for the course, the student or the airline? This depends on the amount of "salary deduction" imposed by the airline. If none then the airline has effectively paid for it with the student just lending (the bond) it the money. The amount the student has its salary reduced is the extent to which they are funding it.

Most schemes I have heard of involve a significantly reduced salary for a finite period. However, take home pay may be the same or higher than a "normal" salary as there is no tax on the bond repayment

Whirlygig

12th Nov 2006, 22:10

In a nutshell, it no longer qualifies.

You may wish to set up as "self-employed" and reclaim the VAT if you can demonstrate that you will be self-employed after qualification. Best seek the advice of an accountant for that. However, if you plan is to become employed by an airline, then you be liable to repay the VAT.

Cheers

Whirls

Jetdriver

12th Nov 2006, 22:18

Yes 80 posts and counting, so this is where I am now sending you.

TelBoy

17th Jan 2007, 19:36

Does anyone know if in the UK as a sole trader you can claim tax relief on CPL training. If you register for VAT can you also claim back the VAT on this training.

Interested if the training is in UK or USA - it might make a difference.

Interesting thought eh:)

Re-Heat

18th Jan 2007, 10:24

In a word, no.

Whirlygig

18th Jan 2007, 10:40

I don't think there is any sales tax in the USA on flight training but even if there was, you couldn't reclaim it in this country.

Please read the previous 90-odd posts!

Cheers

Whirls

3bars

1st May 2007, 10:58

Hi,

I am planning to start a type rating in June, which is subject to VAT. :eek:

I am irish, and will be unemployed during the training. My qestion is this:

Is there any way for someone in my position to to be VAT exempt?

I've been to a financial advisor but they don't know.:ugh:

Thanks

Re-Heat

1st May 2007, 11:03

In which country is the training?

If in the UK, not a chance in hell of reclaiming VAT, not to mention that you won't be unemployed either, as you are not available for employment and are undergoing an training course of your own volition.

Can the cost of professional training be offset against your income tax when you start working as a pilot?
Not at all unfortunately.