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HMRC internal manual

Employment Status Manual

Contracts of Training and Apprenticeship: Contracts of Training

Where someone is engaged under a contract of training anything they receive under that contract is not likely to be chargeable to income tax as employment income or subject to Class 1 NICs. This is because they are either not required to provide any service to the engager or any service that is provided is minor.

There is no statutory definition of what is meant by a contract of training although the subject was considered in the case of Wiltshire Police Authority v. Wynn [1981] QB95, referred to in ESM2610. Lord Denning M.R. concluded that police cadets were working neither under a contract of service nor a contract of apprenticeship. He stated

“They are giving minor assistance in the work. They are not being taught a trade such as would make them an “apprentice”. They are not doing work for the employer so as to be under a “contract of service”. They are neither apprentices nor servants. They are in a class by themselves - police cadets.”

He went on to say that

“He or she is in a special category of an appointee for training - to be trained both generally and to see how the job is done…”

The question of training was also considered by the Special Commissioners in the case of Walters v Tickner. Mrs Tickner was sponsored by the Home Office for a social work course at University College Cardiff with a view to her training and qualifying as a probation officer. The Special Commissioner held that she did not have a contract of service. Although the contract was couched in terms appropriate to employment, Mrs Tickner performed no duties as an employee and the object of the contract was to further her education and training.

Where the consideration for the payments received under a contract is the undertaking by the recipient of a course of study or learning with no service (or the provision of only minor assistance), the contract is not a contract of service at all.

Where an employee is sent on a training course then the nature of his or her engagement does not change and any income received will continue to be taxed as employment income and subject to Class 1 NICs. However, see EIM06235 regarding the application of Statement of Practice 4/86 where an employee is released for a sandwich course at a university or college.

Each case needs to be considered on its own merits and it is essential that the written contract and/or documentation containing reference to terms and conditions are examined before giving an opinion on the nature of that contract.

Individuals may be engaged under training contracts or traineeships but they may be employees. For example, trainee solicitors and accountants may not only have training contracts with a principal or a firm but also contracts of service with the firm. Additionally, where the contract involves a mixture of training and service and amounts to a contract of apprenticeship then a tax and NICs liability may arise (see ESM2610).