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I am currently an employee of a company. My employer has…

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I am currently an...

I am currently an employee of a company. My employer has paid for some education (a part-time MBA that I attend in my own time) - I am in the middle of the course now, it finishes in 6 months. When negotiating the training my employer mandated that if I leave the firm less than three years after leaving then I will pay a proportion of the course cost back (< 1 year 100%; <2 years 70%; <3 years 30%). I wish to leave the organisation and set-up my own limited company as an IT Consultant. I will be the sole director and will have no other employees. Can my new company reach an agreement to pay my current employer the training fees on my behalf? What would the tax position of that payment be?

Accountant's Assistant: The Accountant will know how to help. Is there anything else the Accountant should be aware of?

Only that my preferred position would be for my new limited company to pay for the training (it was circa £45,000, but I expect to be able to negotiate that down) out of pre-tax profits (e.g. as a cost of doing business). I have heard anecdotally that this is possible if the payback clause is also transferred (that is, I would have to stay with the limited company for 3 years after finishing the course).

Submitted: 2 months ago.Category: UK Tax
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Customer reply replied 2 months ago
My current company is a UK company and I am a normal PAYE employee.
Answered in 16 hours by:
5/26/2018
UK Tax Professional: Sam, Accountant replied 2 months ago
Sam
Sam, Accountant
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Hi, Sam here, one of the UK Tax Experts here on Just Answer, Thank you for your question - I shall reply shortly.

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UK Tax Professional: Sam, Accountant replied 2 months ago

Hi

No the contract was between you and the employer so it would be unusual to find an employer willing to agree this. Furthermore this is a personal expense once you leave this employ - as I would assume it put you in a better position than you were. So even if you take on this debt through the limited company - you will have to make good this amount through a debit on the directors loan account and failure to pay this at each end of the accounting year will also see you charged tax on the outstanding balance- so you are best paying this back yourself

Thanks

Sam

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Customer reply replied 2 months ago
The employer would likely agree; they just care about the money and wouldn’t be too bothered where it came from. I would be able to pay the amount back within the first 9 months of trading. Does this change your answer?
UK Tax Professional: Sam, Accountant replied 2 months ago

Hi

Then they should be concerned as this is a personal debt from you to this employer and nothing to do with your planned company - so this does not change my answer I am afraid

Thanks

Sas=m

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Customer reply replied 2 months ago
Hi Sam
I believe that my current employer would accept a payment from my new limited company to settle. What I'm asking is how that payment can be made in the most tax efficient way possible.
UK Tax Professional: Sam, Accountant replied 2 months ago

Hi

You asked could your limited company pay for the course to reimburse the employer and I have explained no and given you reasons why, I'm not sure how many other ways I can say this- this is not so much whether your employer would care where the payment came from but the legitimacy of paying a personal debt from a limited company, whose profits are the companies and not yours

Thanks

Sam

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