Are coaching expenses tax-deductible?

Lots of companies are now providing coaching packages for their staff, to help with their personal and professional development. Using an external coaching provider such as Theta Coaching Services means the business can access professional coaches pretty much on demand. But how is this expense treated for tax purposes?

The Inland Revenue have issued guidance on work-related training costs but it’s fair to say there is a lot of it and it’s technically worded.

The great resignation

As the massive post-pandemic turnover of staff continues to bite, employers are increasingly looking at support packages to retain and develop their staff. Often, packages will include clear ‘benefits in kind’ – taxable ‘perks’ such as Private Medical Insurance or a company car. The employee will normally pay income tax on the agreed cash value of the benefit via payroll. However, the coaching offered by Theta Coaching would not be classed as a benefit in kind and would therefore not be taxable for the employee.

The reason for this is the Inland Revenue’s employment income manual https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim01210

confirms that any expenditure on work-related training for employees is exempt from tax. The definition of ‘work related’ is “any training course or other activity which is designed to impart, instil, improve or reinforce any knowledge, skills, or personal qualities which are, or are likely to prove, useful to the employee when performing his/her duties.”

At Theta coaching, employees are offered focused coaching designed to mesh with their ongoing professional development. Whether our coaches take an unstructured approach to performance coaching or move into mentoring (where skills- based training is given in a more structured way), our aim is to support that employee’s career goals.

Employer expenses

But what about the expense for the employer? Is this tax-deductible? Can the company itself reclaim any of their outlay on coaching?

A business can claim tax relief on training expenditure for directors and employees providing the training is aimed at improving the skills needed in the business. Allowable training costs are claimed as a deduction when calculating taxable business profits. Therefore, in terms of the business performance coaching Theta Coaching provides, this would be an allowable expense.

In conclusion

Whatever your business turnover, you should keep a note of what you are claiming for and how you worked it out. This is in case of an HMRC investigation and they ask for evidence of what you are claiming for, to check you’ve paid the right amount of tax. It also goes without saying that tax legislation can change at any time and you should always seek professional tax advice for your own situation.

Employee benefits package - coaching

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