Tax relief on training.
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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.
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a Type Rating if you are required to pay for your own to take a job
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!
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Tax relief
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.
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.
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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!
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!
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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
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
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It Is Possible
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.
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.
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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!
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!
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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?
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?
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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
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
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Tax relief
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?
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?
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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
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
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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 ?
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 ?
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Are ATPL costs tax deductable?
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.
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.
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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 a couple of months ago I wrote to my tax office in Wales and am still waiting for a reply.
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.
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.
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.
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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.
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.
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Shame on you Captain Sensible
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.
Dancing with the devil, going with the flow... it's all a game to me.
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Originally Posted by Sensible
Fraid the taxman takes, not gives in aviation.
Cheers,
VFE.