BIM35660 - Capital/revenue divide - intangible assets: Proprietor's training courses
Tax Bulletin article
The treatment of expenditure incurred by the proprietor of a business on training courses for themselves was described in TB1G published in November 1991, which read as follows:
“There is some uncertainty whether the cost of proprietors of a business attending a training course, directly related to the business activity, is deductible in arriving at the profits chargeable to tax under Schedule D Cases I or II.
Where attendance at a course is intended to give business proprietors new expertise, knowledge or skills, which they lack, it brings into existence an intangible asset that is of enduring benefit to the business. We take the view that the expenditure is therefore of a capital nature, and deduction is prohibited by ICTA88/S74 (f).
On the other hand, where attendance is merely to update expertise etc. which proprietors already possess, the expenditure is normally regarded as revenue expenditure and will be deductible if it satisfies the “wholly and exclusively for the purposes of the trade” test in ICTA88/S74 (a)” - see BIM42105.
You should therefore allow proprietors a deduction for expenditure that merely updates existing expertise or knowledge but disallow any expenditure that provides new expertise or knowledge (particularly where it brings into existence a recognised qualification like an Master of Business Administration).
