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Contractors' tax rules a 'disincentive' to invest in training

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The Professional Representation Network (PRN), which provides services to contractors, is calling for chancellor George Osborne to reform tax rules for contractor training in the upcoming budget.

Under current rules, contractors can claim, as a business expense, money spent on improving skills for their current role, but cannot claim back training for a different role. The PRN says this is discouraging contractors from investing in their learning and development, which has a knock-on effect on the skills available for businesses.

PRN director Kristian Gourlay told HR magazine that workers in this country risk falling behind their foreign counterparts unless the rules are changed.

"It does act as a disincentive for contractors to invest in training," he said. "The UK competes most effectively in the higher skills area of the economy like technology, engineering, advanced manufacturing and oil and gas. This means that we need to keep levels of training high to stay competitive."

These highly-skilled sectors are where the highest concentration of contractors is found. Gourlay said that due to the fast-moving nature of these industries, developing a wide skill base is crucial. 

The changes would mean an initial outlay for the government, but Gourlay says this will soon be recouped.

"Training is an investment that tends to pay dividends very quickly and higher contractor earnings will lead to a better overall tax take for the government. In the short term the cash costs to HMRC of allowing a broader range of training as an allowable expense is likely to very small indeed. This is a much more advantageous choice than losing the business altogether to overseas competition."