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HMRC internal manual

Employment Income Manual

Employment income: work-related training: excluded expenditure/apportionment of costs

Section 253 ITEPA 2003

Excluded expenditure

An employer’s expenditure will not qualify for exemption under Section 250 ITEPA 2003 (see EIM01210) if, or to the extent that, its purpose is to:

  • provide facilities or benefits for entertainment or recreational purposes which are not in any way connected with acquiring the knowledge, skills, or personal qualities which satisfy the definitions of work-related training. So normal meals, refreshments and leisure activities offered within a training course are not taxable.
  • reward the employee for performing, or performing in a given way, the duties of his/her employment
  • provide an employment inducement which is not in any way connected with acquiring knowledge, skills, or personal qualities which satisfy the definitions of work-related training. For example safe-driver training, taken up by those with a company car, would qualify whereas an evening at the go-kart track would not. Generally, work related training offered as part of the normal recruitment process is unlikely to be a taxable inducement. But the more abnormal the training offer, in nature or amount, the more likely it is that the provider intended the provision as an inducement.

Apportionment of costs

The legislation uses the term “if or to the extent that” expenditure is incurred for an excluded purpose (see above). This allows an apportionment to be made between genuine training costs that are incurred for work-related training and costs whichare incurred with the aim of providing reward/recreation. Where it is necessary to apportion costs, the marginal cost of the reward element should be taxed. For instance, a genuine residential work-related training course is held in a hotel and the attendees remain at the hotel for a golfing weekend paid for by their employer. The costs of travel to and from the hotel and the costs incurred during the course are not taxable but the cost of the golfing weekend is clearly taxable as it is a reward.