Training on the wrong track?

/ 30 October 2006

David Whiscombe

Dass v Special Commissioner and others [2006] All ER (D) 152 (Oct)

The recent High Court case of Dass underlines the anomalies which exist in the area of training costs.


Mr Dass was a self-employed tutor of English and, broadly, educational adviser. He undertook (as a student) a two-year course in law. He failed to get tax relief for the cost which was held to be capital in nature on first principles, on the grounds that “the course was not a ‘refresher’ course to brush up or ‘hone’ the taxpayer’s expertise, but was directed at equipping him with a new qualification enabling him to enter into a new area of practice”.

A different result?

The odd thing is that if Mr Dass had traded through a limited company, and if the company had paid for the course, it is very likely that the tax position would have been entirely different: there would have been no benefit in kind assessable on Mr Dass (by virtue of ITEPA s250) and it is very unlikely that HMRC would have sought to disallow the cost as capital expenditure in the hands of the company: as HMRC themselves say in the context of a company “we find it difficult to imagine circumstances likely to occur in practice where the benefit which the employer obtains can be viewed as an identifiable capital asset. Such factors as the pace of technological and commercial change and an employee’s right to resign and seek work elsewhere militate against such a view.” Why this analysis (at least in respect of the “pace of change”) should be accepted for a company but not for a self-employed trader is a mystery to us. Unfortunately Mr Dass was advocate in his own cause before the Special Commissioner and in the High Court and the apparent inconsistency of the HMRC view does not seem to have been drawn to the attention of either.

Even curiouser is the fact that although the tax system is relatively benign in respect of the training costs borne by the employer there are no special reliefs for identical costs borne by employees themselves: such costs must pass the notoriously strict test of being “wholly exclusively and necessarily incurred in the performance of the duties” and very few training costs borne by employees will qualify. So an employee wanting to improve himself will often be well-advised to negotiate a salary sacrifice with his employer in return for the employer’s agreement to provide the training in question.


It is surely only a matter of time before these anomalies are corrected. Meanwhile, advisers should be aware that in the field of tax relief for training costs, common sense and logic are no guide.


This article was later published by TaxationWeb.

David Whiscombe


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