IR3

9 March 1999

BETTER TARGETED SUPPORT FOR VOCATIONAL TRAINING

To help generate a highly skilled workforce necessary to improve
productivity, the Government is launching Individual Learning
Accounts (ILAs). ILAs will promote life-long learning and encourage
people to take responsibility for their own training and development.
They will become the main source of help for adults to acquire
qualifications, helping them to increase their earnings and
employability.

To encourage employers to invest in their employees' training, the
Chancellor announced that contributions made by employers into ILAs
held by their employees will qualify for a deduction from taxable
profits and will be tax and NICs free in the hands of their employees
provided employers contribute to the ILAs of their lowest paid
workers on similar terms. ILAs will provide a 20 per cent discount
for everyone, on eligible training costs of up to #500 a year.

Vocational Training Relief is to be abolished in 2000-01 when the
national framework for ILAs is launched. In the meantime, higher rate
relief will no longer be available for payments made on or after 6
April 1999. Relief at basic rate, however, will continue until
abolition.

Following the launch of ILAs, support from public funds will better
targeted so that in future more help will go to those who have the
greatest need to improve their skills and qualifications. The
immediate removal of higher rate relief for vocational training is
the first step in achieving this.

DETAILS

Individual Learning Accounts

1. The first "starter" accounts will open in 1999-2000. For each of
the first one million accounts, the Government will provide #150 for
spending on education and training, when the holder commits a minimum
of #25.

2. In the following year, a national framework will be put in place
so that ILAs are available to everyone. These ILAs will provide:

    - discounts for everyone of 20 per cent on spending on eligible
      courses up to #500 a year, 
    - and more generous discounts for certain key courses, including
      computer literacy.

3. Any necessary legislation in connection with employers'
contributions into ILAs will be brought forward next year when the
details of how ILAs will operate have been settled.

Vocational Training Relief

1. Higher rate relief will no longer be available and should not
therefore be claimed for payments made to training providers on or
after 6 April 1999.

2. Vocational Training Relief will be completely abolished in 2000-01
once the national framework for ILAs is in place. The final date for
making payments which attract Vocational Training Relief will be
announced nearer the time.

3. In addition, Extra-Statutory Concession (ESC) A64 will be
withdrawn from the same date. This concession gives tax relief for
expenditure on job- related training courses that employees pay for
themselves, but only in very limited circumstances.

NOTES FOR EDITORS

1. Vocational Training Relief (VTR) is the tax relief available to
individuals who pay for certain costs of their own vocational
training. Most trainees get relief at source by deducting an amount
equal to income tax at the basic rate from the fees they pay to UK
training providers. Training providers then reclaim that amount
directly from the Inland Revenue.

2. Trainees presently claim any higher rate relief due from their
local tax offices or in their Self Assessment returns if they get
them. They will no longer be able to claim this higher rate relief
for payments made on or after 6 April 1999.

3. There are two ways of qualifying for relief:

    - VTR is due if the course being taken is capable of leading to a
      National Vocational Qualification or Scottish Vocational
      Qualification (NVQ or SVQ) and the trainee is at least 16 years
      old and, if less than 19 years old, not in full time education.

    - VTR is also due for non NVQ/SVQ linked training provided the
      course provides skills or knowledge which are relevant to, and
      are intended to be used in, paid employment or self employment.
      The trainee must be 30 or more years old at the time of the
      payment and the course must be full time, lasting for at least
      four weeks but no more than a year.  All teaching and practical
      applications must take place in the UK.

4. To qualify for VTR, trainees must be resident in the UK, not be in
receipt of any other form of tax relief for the fees and not be
receiving, or entitled to receive, public financial assistance for
the course. Trainees must pay for the training themselves and not be
undertaking the course either wholly or mainly for recreational
purposes or as a leisure activity.

5. The removal of higher rate relief will affect around 5,000
trainees who currently claim relief at higher rate. This will yield
less than #3 million in 1999-2000.

INLAND REVENUE PRESS OFFICE
Media enquiries to:           0171 438 6692/6706/7327
(Out of hours: 0860 359544)
Non-media enquiries to:       0171 438 6420/6425
(Office hours only)
Inland Revenue information is on the Internet:
www.inlandrevenue.gov.uk

# = pounds sterling