Q: I'm in the process of setting up a business and want to take some courses. Can this be offset against profits to reduce tax liabilities?
Aug 04 2009
Answered by: Clive Lewis Ask a question
The test for whether expenses are allowable as a deduction against income for tax purposes is whether they are ‘wholly and necessarily incurred’ in pursuit of the trade or business. This is a stiff test but there are some grey areas.
In your case, expenditure on ‘training’ is usually allowable but if the expenditure results in a qualification or a new skill for the business owner it may be more difficult to justify. As an example, if you decide to set up a business as a motor mechanic and decide to go to evening classes to pass examinations, the cost of the course would not be allowable as a deduction for calculating your tax liability. If your business employs a trainee mechanic and as a condition of employment pays for them to go to college, the expense would be allowable.
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