Can you claim for 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 professional fees or subscriptions for being a member and these are usually renewed on an annual basis. There is also a list of `approved’ HMRC professional subscriptions. Therefore, when are professional subscriptions tax deductible?
A contractor who is running their own company, may work in many different industries. As part of their work, they may be a member of one or more professional organisations. Therefore, when can you claim for annual subscriptions you pay to approved professional bodies or learned societies if being a member? In most cases, the body or society will normally charge an annual subscription fee for their membership. In return, they will receive certain benefits. Therefore, can you claim for professional fees as business expenses and, as a result, save Corporation Tax on these costs?
HMRC’s guidelines on the annual subscriptions you pay 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 that you pay to approved professional bodies. But only if you must have this membership or it relates to your job’.
Please note, 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 expenses, the cost has to be `wholly and exclusively’ for your business. The cost should also not have a `duality of purpose.’
When you are in business for yourself, you are not able to claim for any costs that are for your private use 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 (at 13.8%) 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 all sorts of trade sectors that have particular bodies that represent them.
As a contractor, your business may be able to pay for these membership fees or subscriptions. If these provide a benefit to your business, you may also be able to claim tax relief.
If you are employed or are self-employed and your professional subscriptions fall within those that are allowed, you can claim for these via your Self-Assessment tax return.
Further HMRC guidelines surrounding a claim for professional subscriptions
HMRC will allow you to claim for membership fees, that are paid to approved professional organisations. You can claim for these as expenses through your business and these 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 is approved by HMRC; 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 quite extensive but does not cover all professional bodies.
Therefore, there may be body or bodies that you are now a member that is not on this list. If they are not on the list, the official rule is you are not able to claim for the membership fees of these as business expenses.
Claiming for professional subscriptions as an expense
If you can claim tax relief on professional subscriptions, you can record these as an expense in your limited company records.
Alternatively, if you are self-employed you can claim for tax relief by recording these in box 19 on your Self Assessment tax return.
This article gives you a better insight into what you claim for professional subscriptions. As you can see, the rules here are not very simple in terms of what you can claim. There is a list that is available on the net that shows what are 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, who is the employer, has paid for a professional subscription for the employee (you). Therefore, the company should be able to claim for this as a business expense and in turn, it will help to 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.
In our guide that covers tax tips for contractors, we detail many things that you can consider when thinking about ways to make yourself more tax efficient as a contractor.
Link to Contractor Advice UK group on LinkedIn click here