Introduction
As a UK limited company contractor small business owner, can you claim for professional subscriptions as allowable expenses? What’s more, while you’re UK contracting and run your own business, when are professional subscriptions tax-deductible? Let’s think about what’s the professional subscriptions meaning and what are professional subscriptions. These fees are often commonplace when working in a business industry in the UK. Indeed, the subscriptions to a certain body or bodies are relevant to your job or line of work. What’s more, when you’re contracting, most professional bodies or learned societies charge annual contractor professional fees or a professional subscription in return for being a member.
If you’re claiming tax relief on professional subscriptions, when are business subscriptions tax-deductible? We’ll take a look at this and find out when you can save tax on these expenses through your business. HM Revenue & Customs (HMRC) have an approved professional subscriptions list of bodies. Indeed, you can check the list to see if your trade body is on here. Therefore, let’s look at allowable HMRC professional subscriptions and when these are valid business expenses as a UK contractor.
A UK contractor who runs their own company may work in many types of industries. What’s more, they may be a member of one or more white-collar or trade bodies as part of their contracting work. As a result, they may incur trade subscriptions or professional association fees from these organisations. Therefore, when can you claim for professional subscriptions that you pay to certain bodies of whom you’re a member? Also, when are such professional subscriptions tax-deductible or when are subscriptions taxable? In this guide, we’ll look at allowable HMRC subscriptions to professional bodies. What’s more, we’ll look into HMRC list 3 and when you might claim professional subscriptions as a UK contractor.
Initial thoughts
Allowable HMRC professional subscriptions
As we mention earlier, in most cases, the body or society will usually charge an annual professional membership fee. In return for your limited company contractor subscription, you will receive certain benefits as a member. Therefore, can you claim tax relief for professional subscriptions through your business? If you can claim your professional membership fees as business expenses, you can save Corporation Tax on these costs as a UK contractor. As a self-employed person, if you can claim for these you can save tax by including them in your personal tax return.
Common questions
Business owners, contractors and employees alike will have questions on professional fees and subscriptions and when they will save tax on these. Therefore, such common questions from those who pay annual fees could include:
- What is a professional subscription?
- How to claim professional fees and subscriptions?
- Can I claim tax relief on professional subscriptions?
- Can I deduct professional membership fees?
- Can you claim professional membership on taxes?
- Where do I put professional fees on tax return?
Therefore, in this guide we’ll take a good look into what is a professional membership subscription. Furthermore, when you pay a subscription to professional bodies, we will look at when are professional membership fees tax-deductible.
The HMRC approved list of bodies
As we mention earlier, HMRC have a list of trade bodies which you can refer to. Indeed, the list of `approved’ HMRC professional subscriptions list contains certain bodies and we’ll go over this HMRC list of professional bodies later. Therefore, let’s now look into HMRC allowable subscriptions in more detail and what to think about here. Moreover, let’s find out when professional fees and contractor subscriptions for business will save tax.
HMRC guidelines when you claim tax relief (professional fees)
Where you can claim for contractor professional subscriptions
Let’s now look at the HMRC guidelines on paying for business subscriptions and tax-deductible subscriptions. What’s more, when we consider tax relief on professional subscriptions, the HMRC basic guidelines are currently:
`You can claim professional subscriptions tax relief (by this, they mean Corporation Tax in the context of running a limited company or via your tax return if you’re self-employed or employed) on fees or subscriptions which you pay to approved professional bodies. But only if you must have this membership or it relates to your job.’
We can take from this that the membership fee for a certain body should be relevant to your line of work. What’s more, this means that you should only have the membership if it relates to the type of work you do.
Where you cannot claim for contractor subscription costs
Under HMRC guidelines, there are also some membership fees which you cannot claim tax relief on. Per the tax office, you cannot claim for professional subscriptions and reclaim the tax on the payments to these professional bodies where the subs are:
- Life membership subscriptions.
- Fees or subscriptions you have not paid for yourself.
If you put either of the above type of professional subscription or professional fees through your company as a cost, you have to report these on form P11D. As a result, these professional subscriptions (P11D reportable) are subject to Income Tax for you, and NI for your company. Further, you file the P11D form with HMRC once per year, after the end of the tax year.
More considerations
Other factors around allowable HMRC professional subscriptions
When you’re in business for yourself, it is a fact that you cannot claim tax relief on any private costs. What’s more, you cannot claim for any expenses that are for joint use between your business and you personally. In technical terms, we call this the `duality of purpose’ rule. As a result, if you claim for such items through your business, they are taxable as a Benefit In Kind (BiK). Indeed, the BiK will result in extra taxes of:
- Your company will pay Class 1A NIC on the BIK. This NI charge is 14.53% in 2022/23 and 13.8% in 2023/24.
- You’ll also pay tax on the BIK at your highest tax rate through your tax code. Basically, your employer applies your tax code to your salary and this affects how much tax they deduct each month.
Across many industries in the UK, lots of people are in business for themselves. What’s more, many are also employed in these industries. Indeed, they’ll work in their own trade sectors and certain bodies will represent and support them.
As an owner of your own contractor limited company, your business may be able to claim for your membership fees or subscription expenses. Indeed, if your contractor’s subscriptions benefit your business, you may also receive a professional membership tax deduction.
If you’re self-employed or employed and your professional fees fall within those allowable, you can claim professional subscription tax relief via your Self-Assessment tax return.
To sum up
As with any other business expenses, when you are claiming professional fees or a professional subscription that is paid by the employer (your company) it has to be `wholly and exclusively’ for your business. This rule applies to all business costs, such that the expense is just for your company and it does not contain any private element. What’s more, if we look at when are subscriptions tax-deductible, the cost should not have a `duality of purpose’. This means that the cost is not part business and part private. If your subs do not meet either of these tests, you will not receive tax relief on subscriptions. Therefore, when you claim for business subs, it is key that no private element is part of this.
Further HMRC guidelines
Guidance around a professional subscriptions tax deduction
There are further guidelines from HMRC in respect of business subs. Indeed, they will allow you to claim professional fees and contractor business subscriptions which are paid to approved professional bodies. What’s more, there’s a HMRC professional subscriptions list and this shows which UK bodies they currently approve. Therefore, if your body(s) or organisation(s) appear on this HMRC-approved subscriptions list, you can claim such HMRC professional fees as expenses through your business. As a result, they will be tax-free. On the other hand, if you are self-employed, you can claim for such fess through your personal tax return.
HMRC official reference point
Let’s now take a look at more guidelines from HMRC with regard to business subs. Indeed, in relation to the HMRC subscriptions list, the official reference point to note is 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.
These statements mean that the professional fee is relevant to your line of work, and the industry you work in. They also state that the subs benefit you as part of your work and they are shown on the HMRC approved list.
List 3 of approved HMRC bodies
As we mention earlier, there are HMRC approved professional bodies who are shown online as list 3 (HMRC). Indeed, the list of subscriptions is for HMRC approved professional organisations and learned societies. It contains bodies in all sorts of industries and their professional subs are allowable for tax. What’s more, the HMRC professional subscriptions list of approved bodies is quite extensive, but it does not cover all professional bodies. Therefore, you should check the HMRC membership list for the complete list of HMRC-approved professional bodies to see if your trade body is on here.
There may be a body or body you are now a member of who are not on the HMRC approved membership list. If your contractor subscriptions professional body are not on the list, the official rule is that you cannot claim these membership fees. As a result, you will not receive a subscription tax-deduction for this. Furthermore, if you put the claims through your business, you have to report these on form P11D. What’s more, the amount you report will appear in your PAYE code as a deduction against your tax allowances.
Claim for HMRC approved subscriptions as an expense
If you can claim professional fees tax relief on your subscription expenses, you can record these as costs in your limited company records.
On the other hand, if you’re self-employed, you may ask where do I enter work subscriptions on my tax return? When you do this, you can claim your tax-deductible professional fees by recording them in box 19 on your Self-Assessment tax return.
Final thoughts
This guide will give you a better insight into how to claim for professional subscriptions (HMRC) to UK bodies and societies. What’s more, we explain when are professional memberships tax-deductible and what to think about here. As you can see, the rules here aren’t very simple with regard to what you can claim as subscription expenses. Neither is it very clear when is your subscription fee tax-deductible. The HMRC professional membership list shows which bodies they approve of. However, what if your body is not on the HMRC list of approved professional bodies?
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, will pay for a professional subscription for the employee (you). Therefore, the company should be able to claim this as a business expense. If it can, this will help to reduce your company’s tax bill.
There are two such contractor’s professional fees and subs that aren’t on the HMRC professional subscriptions list. Indeed, these are the IPSE membership cost and LinkedIn subscriptions and there’ll also be others too. These both provide benefits for limited company contractors and as a result, many do claim for these. What is more, HMRC is very unlikely to disallow such claims.
Besides this guide on contractor limited company subscriptions, we also have another great guide which covers tax tips for UK contractors. In here, we detail many things to consider when you plan to make yourself more tax efficient as a contractor.
Link to Contractor Advice UK group on