Overview
1005.This Chapter contains exemptions from income tax on the provision of education and training for an employee by employers and third parties. It derives from sections 200B to 200D of ICTA (work-related training provided by employers etc), and from sections 200E to 200J of ICTA (education and training funded by employers etc).
1006.The sections first describe the provision and costs to which they apply. They then define the type of training or education with which they are concerned. Finally, they set out circumstances in which exemption from tax does not apply.
Section 250: Exemption of work-related training provision
1007.This section provides there is no liability to income tax on the provision of work-related training for an employee by the employer or by a person other than the employer.
1008.It derives from sections 200B (expenditure by the employer) and 200D (expenditure by a third party) of ICTA.
1009.Although it is possible for an employee to be exempt from tax under both section 250 and section 311 (retraining courses), it is not necessary (as in section 200C(4) of ICTA) to exclude provision exempted elsewhere, as exemption can be given under either. See Note 30 in Annex 2.
1010.Subsection (1) sets out the exemption. It covers both the provision and the payment or reimbursement of the cost of provision of the training (and any benefit incidental to the training) plus specified related costs.
1011.To accord with Inland Revenue practice, the exemption is expressed to cover training and training costs, whether provided or incurred by the employer or by a third party. See Change 52 in Annex 1.
1012.The exemption is so expressed that no charge arises under Part 2, whether as general earnings or specific employment income, on the provision and costs of work-related training. This reflects Inland Revenue practice not to apply any employment income charge which might arguably apply (say, a specific employment income charge, such as Chapter 3 of Part 6 where the training relates to a change of duties). See Change 51 in Annex 1.
1013.Subsection (2) specifies the ancillary costs within subsection (1)(b)(ii) to which the exemption applies. See Change 53 in Annex 1.
Section 251: Meaning of “work-related training”
1014.This section defines “work-related training” for the purposes of the exemption. It derives from section 200B of ICTA.
1015.The definition covers both the objectives of the training and the employment (or related employment) to which the benefit of that training must be relevant.
Section 252: Exception for non-deductible travel expenses
1016.This section deals with travel and subsistence to which the exemption does not apply. It derives from section 200C of ICTA.
1017.Subsection (1) sets out the conditions to be satisfied if travel and subsistence are not to be excepted from the exemption. Travel must meet condition A or B; subsistence must meet condition B.
1018.The section dispenses with a requirement that the expenses are incurred wholly, exclusively and necessarily in undertaking the training. Instead, as a result of cross-reference to other provisions in this Part and in Part 5, it simply requires amounts to be necessarily expended on travelling or subsistence. This accords with Inland Revenue practice and aligns the rules relating to travel and subsistence expenses in this section with those in sections 310 and 311 in Chapter 10 of this Part (exemptions: termination of employment). See Change 53 in Annex 1.
1019.Subsections (2) and (3) set out conditions A and B respectively.
1020.Travel and subsistence expenses meeting condition B include expenses that, on the assumptions in subsection (4), would be deductible under any provision of Part 5. Under ICTA, expenses within the exemption are restricted to expenses deductible only under selected sections of those rewritten in that Part. See Change 54 in Annex 1.
1021.This section is listed in section 332 (meaning of “the deductibility provisions”). Various provisions in Part 5 then ensure that certain rules in Part 5 do not adversely restrict expenses, deductible under that Part, for the purposes of condition B.
1022.Subsection (4) sets out the assumptions to be made for the purposes of subsections (2) and (3).
1023.Subsection (5) provides definitions for the purposes of the section.
Section 253: Exception where provision for excluded purposes
1024.This section deals with provision to which the exemption does not apply. It derives from section 200C of ICTA.
1025.Subsection (1) disapplies the exemption to provision for excluded purposes.
1026.Relief under section 32 Finance Act 1991 (vocational training) was repealed by Finance Act 1999, with effect from 1 September 2000 (SI 2000 No 2004, Finance Act 1999, section 59(3)(b), (Appointed Day) Order). As the exclusion from the exemption of amounts eligible for vocational training relief is obsolete, this Act does not rewrite section 200C(5) of ICTA.
1027.Subsections (2) to (4) list and define the excluded purposes.
Section 254: Exception where unrelated assets are provided
1028.This section excepts provision of assets from the exemption, where the assets are not training-related. It derives from section 200C of ICTA.
1029.Subsections (2) and (3) define “training-related asset” and “training materials”.
1030.The definition of “training materials” consists of an illustrative, rather than exhaustive, list to cater for future development in the means of delivering training without having to amend the list. See Note 31 in Annex 2.
Section 255: Exemption for contributions to individual learning account training
1031.This section provides there is no liability to income tax, from a current or former employment, on the provision of, and payment or reimbursement of the costs of, individual learning account training given by a person other than the trainee’s employer (or former employer).
1032.It derives from sections 200E (education and training funded by employers) and 200J (education and training funded by third parties) of ICTA.
1033.Although an employee may be exempt from tax under section 255 and either or both of sections 250 (work-related training) and 311 (retraining courses), provision exempted elsewhere need not be excluded (as in section 200H of ICTA), because exemption can be given under any of these. This Act does not therefore rewrite section 200H. See Note 30 in Annex 2.
1034.Subsection (1) sets out the exemption, which covers the provision of training by a training provider, funding of that training, incidental benefits of training and specified other costs paid or reimbursed.
1035.To accord with Inland Revenue practice, the exemption is expressed to cover the provision, funding and benefit of individual learning account training, whether funded or provided by the employer (or former employer) or a third party. See Change 52 in Annex 1.
1036.The exemption is so expressed that no charge arises under Part 2, whether as general earnings or specific employment income, on the funding and provision of individual learning account training. As with work-related training (section 250), it is Inland Revenue practice not to apply any employment income charge which might arguably apply. See Change 55 in Annex 1.
1037.Subsection (2) defines the trainees eligible for the exemption as account holders under the Learning and Skills Act 2000 and parties to arrangements under the Education and Training (Scotland) Act 2000.
1038.Subsection (3) specifies the ancillary costs within subsection (1)(d) to which the exemption applies. See Change 53 in Annex 1.
Section 256: Meaning of “individual learning account training”
1039.This section defines “individual learning account training” for the purposes of the exemption by reference to the Learning and Skills Act 2000 and the Education and Training (Scotland) Act 2000.
1040.It derives from section 200E of ICTA.
Section 257: Exception for non-deductible travel expenses
1041.This section deals with travel and subsistence to which the exemption does not apply. It derives from section 200F of ICTA.
1042.Subsection (1) sets out the conditions to be satisfied if travel and subsistence are not to be excepted from the exemption. Travel must meet condition A or B; subsistence must meet condition B.
1043.The section dispenses with a requirement that the expenses are incurred wholly, exclusively and necessarily in undertaking the training. Instead, as a result of cross-reference to other provisions in this Part and in Part 5, it simply requires amounts to be necessarily expended on travelling or subsistence. This accords with Inland Revenue practice and aligns the rules relating to travel and subsistence expenses in this section with those in sections 310 and 311 in Chapter 10 of this Part (exemptions: termination of employment). See Change 53 in Annex 1.
1044.Subsections (2) and (3) set out conditions A and B respectively.
1045.Travel and subsistence expenses meeting condition B include expenses that, on the assumptions in subsection (4), would be deductible under any provision of Part 5. Under ICTA, expenses within the exemption are restricted to expenses deductible only under selected sections of those rewritten in that Part. See Change 54 in Annex 1.
1046.This section is listed in section 332 (meaning of “the deductibility provisions”). Various provisions in Part 5 then ensure that certain rules in Part 5 do not adversely restrict expenses, deductible under that Part, for the purposes of condition B.
1047.Subsection (4) sets out the assumptions to be made for the purposes of subsections (2) and (3).
1048.Subsection (5) provides definitions for the purposes of the section.
Section 258: Exception where provision for excluded purposes
1049.This section deals with provision to which the exemption does not apply. It derives from section 200F of ICTA.
1050.Subsection (1) disapplies the exemption to provision for excluded purposes.
1051.Subsections (2) and (3) list and define the excluded purposes.
Section 259: Exception where unrelated assets are provided
1052.This section excepts provision of assets that are not training-related from the exemption. It derives from section 200F of ICTA.
1053.Subsections (2) and (3) define “training-related asset” and “training materials” similarly to section 254(2) and (3).
1054.The definition of “training materials” again consists of an illustrative, rather than exhaustive, list to cater for future development in means of delivering training without having to amend the list. See Note 31 in Annex 2.
Section 260: Exception where training not generally available to staff
1055.This section sets out the requirement that individual learning account training be generally available to an employer’s staff or former staff. It derives from section 200G of ICTA.
1056.Subsection (1) limits the exemption to funding and other costs incurred under “existing arrangements” which cover the making of contributions to such funding and other costs of individual learning account training for employees generally.
1057.The section extends contributions made to “existing arrangements” to contributions made by a third party as well as an employer (or former employer).
1058.Subsection (2) defines “existing arrangements” so as to link the making of contributions to arrangements in place at the time the contributions are made, whether by the employer (or former employer) or by a third party. See Note 32 in Annex 2.
1059.Subsections (3) to (5) authorise the Treasury to make regulations to determine the employer of Crown servants for the purposes of this section.