HMRC Revises Guidance on Tax Relief for Business Training Costs

HMRC have updated their guidance on when training expenses for business owners can be claimed as a tax-deductible expense.

Previously, HMRC’s approach was to deny tax relief for training that taught a business owner new skills. They argued that this type of learning created a capital asset — an enduring benefit to the business. Therefore, it was not deductible. Only refresher or update courses in an existing area of expertise were normally allowable.

Under the revised view, published in 2024, HMRC now accept that the cost of learning new skills within a business owner’s existing trade can be deducted against profits. This is provided the expense is incurred “wholly and exclusively” for the purposes of the trade or business.

The New Approach

HMRC recognise that sole traders and small business owners often need to undertake training to keep pace with:

• Advancements in technology; and

• Changes in industry standards or practices.

The updated guidance allows the cost of training to be deductible against trading profits where the training either:

• Updates existing expertise or knowledge, or

• Provides new expertise or knowledge relevant to the trade or its ancillary purposes.

This change offers much-needed flexibility for business owners seeking to upskill or expand their operations within their current line of business.

Example (From HMRC’s Revised Guidance)

Tim sells handmade pottery at a local market and now wants to expand by selling his products online.
He enrols on an e-commerce course and a short introductory website development course to help him set up an online shop.

Although these courses are not directly related to pottery itself, they will give Tim the skills to reach a wider audience. This will increase sales. HMRC’s revised guidance confirms that these costs are likely to be allowable expenses. This is because the training supports the growth of his existing business. It helps him adapt to modern selling methods.

Training Costs for Employees and Directors

These changes apply only to business owners and sole traders. The rules for employees and company directors remain unchanged. They are governed by separate legislation.

• When an employer pays for work-related training, there is generally no taxable benefit for the employee or director, and the business can deduct the cost for tax purposes.

• However, if an employee or director pays personally for training, it is almost never deductible for employment tax purposes. This is because such expenses are not incurred “wholly, exclusively and necessarily in the performance of the duties” of the employment.

• If the employer later reimburses those costs, the reimbursement is treated as a taxable benefit for the individual.

It is therefore usually more tax-efficient for training costs to be paid directly by the employer rather than reimbursed to the worker.

Need Advice?

If you are unsure whether the cost of a training course you are undertaking will qualify for tax relief, please contact us.
We can review the details of your business activities and confirm whether your training expenses meet the HMRC criteria for deductibility.