Allowable HMRC professional subscriptions

Introduction 

Can you claim professional subscriptions as a genuine business expense? These fees are often commonplace if you work in a professional industry and are relevant to your job. Moreover, most professional bodies or learned societies will charge annual professional fees or subscriptions for being a member.

A contractor running their own company may work in many different industries. They may be a member of one or more professional organisations as part of their work. Therefore, when can you claim for annual subscriptions that you pay to approved professional bodies or learned societies of whom you are a member? As mentioned, in most cases, the body or society will typically charge an annual membership fee, and in return, the member will receive certain benefits. Therefore, can you claim professional fees as business expenses and, as a result, save Corporation Tax on these costs?

There is also a list of `approved’ HMRC professional subscriptions. Therefore, when are professional subscriptions tax deductible?

HMRC guidelines 

HMRC’s guidelines on the annual subscriptions you pay and where the costs are tax deductible are currently:

`you can claim tax relief (by this, they mean Corporation Tax in the context of running a limited company) on fees or subscriptions you pay to approved professional bodies. But only if you must have this membership or it relates to your job.

Please note that you are not eligible to claim UK tax back on fees or subscriptions that are paid to professional organisations on:

  • Life membership subscriptions.
  • Fees or subscriptions you have not paid for yourself.

If you put either of the above through your company as a cost, they will need reporting on form P11D and be subject to income tax for you and National Insurance for your company.

To sum up, as with any other business expense, the cost has to be `wholly and exclusively’ for your business. The cost should also not have a `duality of purpose.’

Other factors 

When you are in business for yourself, you cannot claim any costs for your private or joint use. In tech-speak, we call this `duality of purpose.’ If you claim for these such items will be taxable as a Benefit In Kind (BIK):

  • Your company will pay Class 1A NIC (15.05%) on the BIK.
  • You will also pay extra tax on the BIK at your highest tax rate through your tax code. In turn, this will apply to your salary.

Across many industries, lots of people are in business. They will work in trade sectors with particular bodies representing them.

As a contractor, your business may be able to pay for these membership fees or subscriptions. If these benefit your business, you may also be able to claim tax relief.

If you are employed or self-employed and your business subscriptions fall within those allowed, you can claim for these via your Self-Assessment tax return.

Further HMRC guidelines surrounding a claim for subscriptions 

HMRC will allow you to claim membership fees paid to approved professional organisations. You can claim these as expenses through your business, which will be tax-free. 

According to HMRC’s Section 344 ITEPA 2003A:

`A deduction from earnings from employment is allowed for an amount paid in respect of an annual subscription provided’:

  • It is payable to a body that HMRC approves; and
  • The activities of the body are of direct benefit to, or concern the profession practiced in, the performance of the duties of the employment. Therefore, the society is relevant to your line of work.

HMRC also approves a list of bodies online whose subscription fees are allowable for tax. This list of `approved’ HMRC professional subscriptions is extensive but does not cover all professional bodies.

Therefore, there may be a body or body you are now a member of that is not on this list. If they are not on the list, the official rule is that you cannot claim these membership fees as business expenses. If you put the claims through your business, they will be reportable on form P11D, and the amount paid will appear in your PAYE code as a deduction against your tax allowances.

Claiming for your business subscriptions as an expense

If you can claim tax relief on your subscriptions, you can record these as an expense in your limited company records.

Alternatively, if you are self-employed, you can claim tax relief by recording these in box 19 on your Self-Assessment tax return.

Final thoughts 

This article gives you a better insight into what you claim for subscriptions to professional bodies. As you can see, the rules here are not very simple regarding what you can claim. A list on the net shows what is allowed as HMRC professional subscriptions, but what if your body is not on here?

When you are paying for business subscriptions, it would seem that if you are:

  • A member of a body in your industry; and
  • It provides your business with benefits.

Your company, the employer, has paid for a professional subscription for the employee (you). Therefore, the company should be able to claim this as a business expense, which will help reduce your company’s tax bill.

Two such subscriptions that are not on the lists that spring to mind are the IPSE and LinkedIn.

There will also be others. These both provide benefits for contractors, and as a result, many do claim for these. Therefore, HMRC is unlikely to disallow such claims.

We have a guide that covers tax tips for contractors. In this, we detail many things to consider when making yourself more tax efficient as a contractor.

Link to Contractor Advice UK group on

LinkedIn    https://www.linkedin.com/groups/4660081/

Published On: August 1st, 2022 / Categories: Expenses, Expenses Guides, First timer guide /

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5 Comments

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