Rules on which training costs can be deducted as a business expense are damaging the development of the UK’s skill base and needs to be re-thought in time for this year’s Budget, says the Professional Representation Network.
The Professional Representation Network explains that current tax rules discourage self-employed contractors, who make up a crucial part of the workforce in many high growth sectors, from investing in acquiring new skills, and risk creating skills shortages.
Under the current rules, contractors can claim training as a business expense if they are refreshing or updating their existing skills, but not if they wanted to add new skills to enable them to take on a wider range of opportunities.
For instance a software programmer who wishes to retrain for a software project management role cannot claim that training as a business expense.
Other examples of training that cannot be claimed as a business expense include:
- An IT systems administration specialist who trains as an app developer
- An oil rig machine worker who trains as a fire & gas safety professional
- An IT manager who takes an MBA so that they can provide more senior level advice to IT start-ups
Contractors typically work in fast moving sectors such as IT, mobile technology, oil & gas, engineering and financial services. The skill requirements in these sectors can change rapidly as technology evolves. Having the chance to train in areas outside their current expertise means that contractors can respond to changing business demand, and create a portfolio career: moving from contract to contract without long gaps of unemployment.
Kristian Gourlay, Professional Representation Network’s Managing Director, says: “The Government is supportive of improving the UK’s skill base and making this change to business expenses rules would help meet that objective.”
“Competition in areas such as IT, finance and oil & gas services is intense and it is fought on a global basis. We need to give both contractors and full time employees the best possible skills and allow the self-employed the tools to move from slow growth parts of their market to take advantage of growth opportunities. That is to the wider benefit of the UK economy.”
“Giving more sensible tax breaks on training costs will allow all UK contractors, and the UK businesses they work for, to keep moving up the value chain and avoid being stuck with redundant skills or in shrinking market segments.”
“The tax rules on training for contractors don’t reflect how contractors work or the rapidly evolving needs of the businesses that use them. It would make a lot more sense if contractors could claim for any business training as a business expense.”
Professional Representation Network explains that contracting is now a career choice for many highly skilled professionals and it is likely that in the next few years more professionals will choose to become contractors.
Adds Kristian Gourlay: “The tax rules need to change so that contractors have the opportunity to develop as wide a skills base as necessary.”
“If businesses can’t find the skills they need amongst UK contractors, when they need them, the reality is that they will be forced to look overseas.”