Query on Tax Treatment of Tuition Fees

[InfoSeeker]

I am planning to do the ACCA qualification starting this December. My employer will not be providing financial assistance for this. I have looked at the Revenue website & the college I will be attending for this is listed as an approved body, therefore I should be entitled to relief at the standard rate. I will contact them directly re this to confirm.

However, my query is as follows; what would be the 'real cost' to the employer if he paid for this. For example, if the course costs 1K then I should get 200 in relief leaving a real cost to me of 800 euros.

If my employer paid for this, then does someone know what the approx real cost would be for them? The reason for asking is that I would be forego a wage increase in lieu of support for this but I want to see what the cost would be for the employer.

 

[billythefish]

What is your employer's legal form? Sole trader/Audit firm? Limited company?

 

[InfoSeeker]

Limited company

 

[deadlyduck]

The basic calculation would be along the following lines if your employer pays it and you forego a wage increase:

Gross cost of course 1000
Less:
Gross annual wage saved (XXXX)
Employer's PRSI saved (XXXX @ 10.75%) => see note
Net cost to employer XXXX
Less:
Tax saving on above @ 12.5% (XXXX)
Net cost after tax relief XXXX

Note: This % depends on your weekly earnings; it would be 8.5% if you earn up to €356 per week, assuming you're a Class A emplopyee for PRSI purposes.

 

[billythefish]

If it is a big limited company, it will see the net cost of any expense as being the cost net of 12.5% corporation tax. So they would view the net cost of a €1,000 expense as €875.

If it is a small company, probably owner managed, they would most likely look on a €1,000 expense as being €1,000 that they can't take as salary. An extra €1,000 in salary would net them (assuming 41% tax, 7% prsi and 3-5% income levies) an extra €470 to €490.

I hope that this helps...

 

[JQ2002]

If the employer decides to reimburse you say 40% of the college fees after you have paid the 100% personally and claimed tax relief on the 100%, are they entitled to deduct 100% of the tax relief on the 40% reimbursement?

A friend of mine was asked did she claim the relief and if so how much as her employer was planning on deducting it from the 40% reimbursement.

At the time of sitting the course, her employer said they would not be reimbursing her so she claimed the full relief.

 

[InfoSeeker]

Thank you deadlyduck for your response, it is much appreciated.

 

[InfoSeeker]

Thanks for the response billythefish & the additional point re the company being owner managed. In my situation, it would be owner managed so it is very relevant to me that the owner might view the additional expense as costing them approx 500 euro in wages for every 1k expensed in tuition fees whereas the same 1K paid in salary directly to me would cost them 1,107.50.

 

[billythefish]

Thanks for the response billythefish & the additional point re the company being owner managed. In my situation, it would be owner managed so it is very relevant to me that the owner might view the additional expense as costing them approx 500 euro in wages for every 1k expensed in tuition fees whereas the same 1K paid in salary directly to me would cost them 1,107.50.

Well, you're probably not comparing like-with-like there. Yes, €1,000 in gross wages would cost them €1,107.50, but in real terms (using the figures and assumptions taken earlier), the real cost would be €521 to €543 (i.e. 47% or 49%).