Contractors, make the most of your festive furlough, with a tax-deductible training course

After some initial confusion back in March, as the UK grappled with the impact of the covid-19 pandemic, PSC directors fortunately got the green light to access the Coronavirus Job Retention Scheme (CJRS), so they could furlough themselves.

The CJRS allows furloughed workers to receive up to 80 per cent of their monthly wage, contributed by the government.

But it comes with many rules and regulations, covering what PSC directors can’t do, and can do – like, fortunately, a tax-deductible training course, writes Joanne Harris, technical commercial manager at SJD Accountancy.

Same furlough day; same statutory duties - right?

Before we explore this pocket-friendly professional development opportunity, contractors should bear in mind that despite being relaxed a little to allow flexible furloughing, the CJRS is quite restrictive for limited company directors, as statutory duties are the only officially encouraged activity during the hours furloughed.

This means that, even trying to build future plans for your business risks breaching the terms of furlough. So it’s essential for PSC directors to use their furloughed time wisely, constructively, but without risking the loss of what is likely to be their only financial help from the government during this ongoing pandemic.

Can PSC directors work while furloughed? 

When the CJRS was introduced, PSC directors who qualified were quick to point out that they have statutory duties as a director, under the Companies Act 2006, which requires them to oversee their company with proper care and judgement.

It was later confirmed by HM Treasury that PSC directors can carry out these statutory duties while on furlough, but they must not carry out any work that would be ‘judged unnecessary for that purpose.’

And ‘unnecessary work,’ as stated in the government’s CJRS guidance, is defined but not limited to work that would be undertaken in normal circumstances to ‘generate commercial revenue or provide a service to, or on behalf of’ the limited company.

Therefore, although a PSC director can do some activities they might regard as ‘work’ when on furlough, the tasks permissible are limited to statutory duties only.

Is training allowed while on furlough?

With only statutory duties allowed while furloughed, and the CJRS now set to continue until Spring 2021 following the government’s decision in November to extend it, many PSC directors will have found themselves with hours to spare, as the duties are not usually very time-consuming.

So it is fortunate that, as is the case for other furloughed workers, directors of PSCs are permitted to complete training while they continue to claim under the Coronavirus Job Retention Scheme. Therefore, we believe PSC directors should consider taking advantage of this precious downtime to train and upskill.

Why? Well, the labour and consulting markets are set to become increasingly competitive because of the pandemic (availability of candidates is at historical highs), as well as after it. So using this time to hone your skillset and sharpen your offering will likely stand your business in good stead for the future.

Can PSCs claim expenses for training and, if so, what courses?

If a PSC director decides to undertake a training course while on furlough, they will be permitted to claim the usual allowable business expenses for this activity.

However, there are restrictions to the type of course that can be claimed for:

• The course must be related to the trade of the business; and
• The course must be geared towards improving existing skills and knowledge;
• The course, therefore, must not be geared towards the acquisition of new skills.

So training that confers new skills to help start a new business, or expand an existing one into new areas (including those related to the current field of expertise), will not be an allowable business expense.

For example, an IT developer could fund a ‘refresher’ course on coding through the business, but would not be able to benefit on tax relief for a new, separate skill such as learning a new language. That’s probably going to be a disappointment for the many techies Googling ‘Python,’ and half as popular apparently but still a respectable second favourite, ‘Java.’

How to abide by HMRC expenses rules and claim for training

If the training meets the above requirements (i.e. it’s a refresher, rather than training afresh in something new, even if related to your current skill), the business can pay for this – and it can pay for any associated travel and subsistence costs. Collectively, these costs will be deductible for corporation tax. There will also be no benefit-in-kind charge or personal tax to consider. So furlough this festive period need not be as unproductive, or inefficient, as you may have feared!

That said, please consider that the need for travel and overnight stays is unlikely in the current climate, depending on your specific coronavirus-related Tier.

Yet technically-speaking, in terms of tax, it is still possible to claim for training which requires a trip away, or even overseas. Therefore, and coronavirus-related rules permitting, a two-day conference abroad could be claimed for. Just be careful to retain and include records like itineraries and timings, to prove it wasn’t a personal trip!

Expand your skills, but stay within the rules

As 2020 draws to a close, PSC directors will be looking back on a year of unprecedented challenges and potentially, unparalleled opportunity too. In the main, the limited company contractor community have been forced to pivot and adapt like never before, so their businesses can survive. But right now, having some extra time to train and upskill while helping to build stronger business resilience for the pandemic’s passing, is perhaps the most positive activity to invest yourself in, amid this still-challenging time.

With furlough now due to run quite far – until Spring 2021, the time for PSC directors who are accessing the CJRS to undertake training couldn’t look more ideal. When done right, it can prove both non-taxing and highly efficient for your personal and business development.