Tax relief on training.
Join Date: Mar 2001
Location: UK
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VAT and tax deduction
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
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
The Original Whirly
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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.
Senis Semper Fidelis
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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!!
But only time will tell!!
I say there boy
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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'.
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'.
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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
Appreciate the info.
Thanks,
Desk-pilot
Free Man, Not a Number
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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
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
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
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
Join Date: Mar 2000
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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
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
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Are ATPL training costs tax deductable?
I have just been scanning 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
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
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
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
Join Date: May 2001
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nvq inland revenue may want tax back
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
Join Date: Nov 2001
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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.
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.
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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">
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">
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Claiming back tax on training
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?
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?
Join Date: Nov 2004
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Pilot Training and Tax
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
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