Tax relief for training apprentices: there’s never a good time to ask

The CIPD has called for tax relief for organisations taking on and training apprentices. What’s the likelihood of this coming to pass? Slimmer than Kylie’s waist.

Timing, as they say in comedic circles, is everything. It’s also a mantra that applies to many areas of human endeavour, including utterances from the Chartered Institute of Personnel and Development (CIPD).

It recently called for tax breaks for organisations spending money on training. In particular, it wants tax relief on the money small and medium-sized enterprises (SMEs) spend training apprentices.

This plea came in the lee of Gordon Brown’s recent promise to increase apprentice numbers from about 200,000 to up to 400,000 by 2013. The CIPD’s logic is that most apprenticeships are with SMEs, and therefore if they are granted tax relief on training these youngsters, they will be more willing to take them on.

This begs several questions:

  • Why should the taxpayer subsidise employers training youngsters who work as well as learn?
  • How will this scheme be administered?
  • How much would it cost?
  • Wouldn’t it be wide open to fraud and abuse?

I could go on. But the one thing in favour of the CIPD’s big tax break idea is that it is targeted. Other recent ones – for example, by the engineers’ union in 2006 and the Institute of Chartered Accountants in England and Wales in 2003 – have called for blanket tax relief on training spend.

Frankly, those calls had as much chance of being heeded as Gordon ‘Prudence’ Brown cracking an ad-lib joke.

Of course, one feature of the CIPD’s call that would appeal to dear old Prudence is that it would involve form filling and checking on a heroic scale. Brown loves means-tested benefits and tax breaks, so that would be right up his boulevard.

Unfortunately for the CIPD’s think tank, the tax break call couldn’t have come at a worse time: the UK’s public finances are in a very poor shape.

Under Brown’s and Alistair Darling’s chancellorships, the national debt has hit £478bn – that’s £7.96bn for each one of us. Chuck in the Northern Rock liabilities, a state pension liability of £530bn and a faltering economy, and anyone with an Early Learning Centre abacus can see that this is not a time for public purse largesse.

Brown and Darling will also recall the tax relief debacles associated with Individual Learning Accounts (ILA). Remember them? The government would rather you didn’t.

This fiasco was launched in 2000, and in 2001, as a consequence, tax relief on vocational training spend was abolished. ILAs were supposed to promote life-long learning and encourage individuals to take responsibility for their own training and development.

Contributions paid by employers into employees’ ILAs qualified for tax relief on their profits, while staff paid no tax or national insurance contributions on the money they got for training.

No-one knows for sure how much training this encouraged – what we do know for certain is that it was riddled with fraud and abuse, and the ILA programme was shut down peremptorily in November 2001.

So I’m afraid the CIPD call is more likely to be picked up in deep space than in Downing Street.

Not to say that tax relief on training spend is off the agenda altogether, only it won’t be called that, not in so many words.

When stating that he wanted apprentice numbers to soar, the prime minister said the government will – for which read ‘may’ – pilot a programme for small firms that offer high-quality training, which would involve paying them wage subsidies.

How this will be policed and run effectively is a mystery yet to be revealed, but one thing’s for sure: the government has no plans whatsoever to offer tax relief to employers on their training spend.

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