Tax Savings for Contractors on Training & Learning Costs
With many people experiencing reduced leisure time since the onset of Covid-19, we’ve seen a notable increase in the number of contractors undertaking online training and development, and other courses to make use of time to upskill or brush up on different topics. Much of this type of activity is eligible for tax relief.
If you are a contractor who has been undertaking online training and development, or other courses, there are two ways to obtain tax relief on training and development activities, education and course fees.
Include it in your Expenses to your Umbrella or Limited Company
Claim tax relief from Revenue via myAccount or your annual income tax return
The most suitable method of obtaining tax relief depends on a few variables, such as the nature of the course or training being undertaken and on your own circumstances.
We’ve provided an overview below:
1. Include It In Your Expenses Claims To Your Umbrella Or Limited Company
A high percentage of the types of training and upskilling undertaken by contractors can be included in your usual expenses claims to your Umbrella or Limited Company. Training and upskilling can take various forms. For example, an online training course, purchasing books or audio books or undertaking an accredited professional qualification.
In general the cost of training, courses, books, and other variations of learning and upskilling can be claimed, provided it:
relates to your current contract role,
allows you to gain knowledge for your role to perform your duties better and,
is wholly and totally relevant to performing the duties of your contract.
The scope of costs which may be claimed is widened slightly beyond the above if you are operating under your own Personal Limited Company instead of an Umbrella Company. In this case, the cost of learning and upskilling which enables you to perform future (not just current) work duties better, is allowable.
If you are an umbrella contractor considering taking on a significant course to upskill in new areas for the future benefit of your career, it may be possible to claim this expense by operating under your own Personal Limited Company.
For advice on whether operating under your own Personal Limited Company would suit your circumstances, contact our Solutions Team on email@example.com.
In all cases unfortunately however, the cost of non-work related courses cannot be claimed.
2. Claim Tax Credits From Revenue Or Include In Your Annual Income Tax Return
If you are undertaking a course which is not otherwise allowable as part of your expenses under your Umbrella or Limited Company, you may still be entitled to tax relief under the government’s tax relief for Tuition Fees for Third Level Education.
Only certain qualifying courses are eligible for this tax relief. Information about Approved Colleges and Courses is available at: https://www.revenue.ie/en/personal-tax-credits-reliefs-and-exemptions/education/tuition-fees-paid-for-third-level-education/approved-colleges-and-courses.aspx
If your course is eligible for the relief, the maximum claim is €7,000 per course, per person, per academic year. However, the first €1,500 is ignored for part-time students, which would be applicable to most working contractors. If however, you are taking time off between contracts to study full-time, the first €3,000 is ignored for full-time students.
Tax relief at 20% is available on the cost of the course (subject to the maximum €7,000) less the disregarded €1,500 or €3,000.
To provide an illustrative example:
Assuming your eligible course cost €5,000 and you are studying part-time, your tax relief is calculated as follows:
Cost of course: €5,000
Less disregarded amount: €1,500
Multiplied by Tax relief at 20%: €700
Want To Know How Much Expenses Can Affect Your Take Home Pay?
Get your free illustrative take-home pay calculation from our expert Solutions Advisors.
You might also be interested in:
Working from home during COVID-19? How to maximise your home working expenses.
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