First of all, as a contractor who is running your own company, you may work in many different industries. As part of your work, you may be a member of one or more professional bodies. When you are a member, these will normally charge you an annual subscription fee for your membership. In return, you receive certain benefits. Therefore, can you claim for professional subscriptions as business expenses and as a result save Corporation Tax on these costs?
HM Revenue & Customs (HMRC) guidelines
HMRC’s current guidelines on this are:
`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’.
What’s more, you are not able to claim tax back on fees or subscriptions on:
- life membership subscriptions
- fees or subscriptions you have not paid for yourself
To sum up, as with any 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, 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):
a) your company will pay Class 1A NIC (at 13.8%) on the BIK;
b) 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 that have particular bodies that represent them.
As a contractor, your business may be able to pay for these subscriptions. If these provide a benefit to your business, you may also be able to claim tax relief.
Further HMRC guidelines surrounding a claim for professional subscriptions
`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, there may be body or bodies that you are now a member that is not on this list. If they are not o the list, the official rule is you are not able to claim for them as business expenses.
I hope 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, but what if your body is not on here?
It would seem that if you are:
1) a member of a body in your industry; and
2) it provides your business with benefits
You should be able to claim for this.
Two 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 my tax tips for contractors guide I detail many things that you can consider to make yourself more tax efficient when you are a contractor.