Attending conferences and investing in ongoing training can be a great way for small business owners and the self employed to keep current on industry developments, ensure ongoing professional development and improve their skills. It also allows for networking...
Attending conferences and investing in ongoing training can be a great way for small business owners and the self employed to keep current on industry developments, ensure ongoing professional development and improve their skills. It also allows for networking opportunities and occasionally includes trips to exotic locations, which can be a welcome change in environment from working at your office. As an added bonus ,the cost of conferences, conventions and seminars as well as corresponding travel expenses are deductible against your business income, subject to specific guidelines discussed below.
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Conferences/Conventions/Seminars:
Only 2 events per year are deductible as a business expenses.
Per guidance from CRA re convention expenses with respect to self employed taxpayers who either carry on a business or practice a profession (Lawyers, doctors, CPAs, Engineers etc.), convention expenses are deductible if , :
held by a business or professional organization,
attended in connection with the taxpayer's business or professional practice, and
held at a location that may reasonably be regarded as consistent with the territorial scope of the organization.
The taxpayer does not have to be a member of the organization sponsoring the convention but if they do attend, the convention must be related to the business or professional practice carried on by the taxpayer. A convention may be defined as a” formal meeting of members for professional or business purposes”.
The conference must be held within the “territorial scope” of the sponsoring organizations. Territorial scope refers to the geographical area where the organization normally conducts its operations. Eg, the Canadian Institute of Chartered Accountants would have to hold the qualifying event somewhere in Canada otherwise the deduction might be denied.
There is an exception with respect to conventions, held in the United States, that are “national in character” which are allowable as a business expense.
Often conferences will provide meals, usually lunch, which is included in the total cost paid, however, the meals amount is not specifically identified. In such cases, CRA requires that $50 per day of the conference be allocated to meals and entertainment expense. Note that the reallocation of $50 per day is not required if only snacks such as juice, coffee, doughnuts and muffins are provided.
When a convention is combined with a vacation there should be a reasonable allocation of personal expenses relating to the trip including all expenses relating to spouses and children. The cost of the actual travel would be the most direct route to get to the convention. If the travel requires a layover to meet with family, for example, this portion should be reasonably considered personal in nature and removed from the total expense.
The rules above also apply to corporations. Corporations may send more than one person to a convention but are ultimately also limited to 2 conventions per year. However, where a corporation has different divisions(diverse business interest that are specifically identifiable), the limit of 2 conventions applies to each division. Finally intra company events are not considered to be conventions and as such do not count towards the limit of 2 per division. Instead these are considered to be training (discussed below)
It should be noted that employees who receive an allowance to attend a convention will have to show this amount as a taxable benefit while the cost of attending the convention will not be deductible. As such it makes more sense for a business to directly pay (or reimburse) for the costs of the convention including conference fees, travel and hotels.
Training Expenses:
Business owners and professionals are allowed to deduct training expenses that allows them to enhance their skills or that are required to maintain a certain number of professional development hours per year. However it is important to first distinguish whether the expense is current or capital in nature.
A capital expenditure, similar to purchases of computer equipment, machinery or goodwill, is essentially an outlay that has a lasting benefit. In order to be deductible it must relate to the business of the self employed/small business owner. A training expense that is capital in nature would be one where the business owner acquires an entirely new skill eg. A lawyer who takes courses on web development or a professor who wants to become a licensed real estate broker. This is not deductible directly as an expense but must be reflected as an eligible capital expenditure and amortized. Eligible capital expenditures account are classified under CCA Class 14.1 with a CCA rate of 5%. This means that you can deduct 5%, per year, of the total training expense.
Conversely, training that merely upgrades or enhances an already existing skill will qualify as a current expenditure and is fully deductible in the year in which it is incurred. For example an accountant who takes courses on a specific area in tax or a programmer who decides to learn a complementary programming language. Often professional development courses that are required to maintain good standing are deductible.
As with all tax deductible expenses, the amounts claimed must be reasonable. In making this determination the location of the training and its duration are both taken into consideration. A course taken internationally will be considered to be unreasonable if the same course costs is available and costs less at home. (be wary of claiming courses in Hawaii or other recognized holiday areas) With respect to duration, 2-3 weeks is usually reasonable for full time training courses, although these can be exceeded when offered by an professional association or when completed towards professional development requirements (for doctors, accountants etc.)
Expenses incurred for days when no training is offered are not deductible, except weekends where the training continues into the following week and it wouldn’t make sense to leave and come back.
Finally training courses should be distinguished from conventions. The former generally takes place in a classroom format with textbooks and instructors while the latter does not require study or mandatory participation.
Training expenses include costs pay to business coaches, mentors and books that allow you to brush up on your existing business expertise.
All business owners, to the extent possible, should take advantage of conferences, seminars and training as they relate to their businesses for the purposes of professional development, networking and gaining new perspectives while escaping the daily grind. Just make sure that it is deductible.
Ronika Khanna is an accounting and finance professional who helps small businesses achieve their financial goals. She is the author of several books for small businesses and also provides financial consulting services.
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