Allowable HMRC professional subscriptions

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Introduction 

As a UK limited company contractor, can you claim for professional subscriptions as allowable expenses? What’s more, while you’re UK contracting and running your own business, when are professional subscriptions tax-deductible? Let’s consider the meaning of and investigate what professional subscriptions are. These fees are often commonplace when working in a business industry in the UK. Indeed, the fees to certain bodies are relevant to your job or line of work. Moreover, when contracting, most professional bodies or learned societies charge annual contractor professional fees in return for being a member. Furthermore, an HM Revenue & Customs HMRC professional subscriptions list covers allowable fees.

If you’re claiming tax relief on professional subscriptions, when are business subscriptions tax-deductible? In this guide, we’ll research this and determine when you can save tax on these expenses through your business. You can refer to the HMRC-approved list of bodies and check if your trade body is on here. Therefore, let’s research allowable HMRC subscriptions and discover when these are valid business expenses as a UK contractor.

A UK contractor who runs their own company may work in many different industries. Indeed, 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 professional fees that you pay to certain bodies of whom you’re a member? In this guide, we’ll research when such fees are tax-deductible and when subscriptions are taxable. Further, we’ll look at allowable HMRC subscriptions to professional bodies. Moreover, we’ll investigate the HMRC list 3 and when you might claim professional membership fees as a UK contractor. 

Initial thoughts 

What are allowable HMRC professional subscriptions?

As mentioned earlier, the body or society usually charge an annual professional membership fee. You’ll receive certain benefits as a member in return for your limited company contractor subscription. 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 these, you can save tax by including them in your personal tax return.

Common questions

Business owners, contractors and employees have questions about 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 do you 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 my tax return?

Therefore, in this guide, we’ll take a good look at what a professional membership subscription is. Furthermore, when you pay a subscription to professional bodies, we’ll research when professional membership fees are tax-deductible.

HMRC approved list of bodies

As we mentioned, HMRC has a list of trade bodies to which you can refer. 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 research HMRC allowable subscriptions in more detail and discover what to consider 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) 

When can you claim contractor professional subscriptions? 

Now, let’s consider the HMRC guidelines on paying for business subscriptions and when they are tax-deductible. What’s more, when we consider professional membership fees as genuine business tax deductions, 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 you’d only have the membership if it relates to the type of work you do.

When can’t you claim for contractor subscription costs?

Under HMRC guidelines, there are certain membership fees on which you can’t claim tax relief. Per the tax office, you can’t 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’ve not paid for yourself.

If you put either of the above types of professional fees or subscriptions through your company as a cost, you must report these as a Benefit in Kind 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’ll file the P11D form with HMRC once yearly after the end of the tax year. 

More thoughts on HMRC professional fees

Factors to consider when determining allowable business subscriptions 

When you’re in business for yourself, it’s a fact you can’t claim tax relief on any private costs. What’s more, you can’t claim any expenses for joint use between your business and you personally. We call this the `duality of purpose’ rule in technical terms. As a result, if you claim for such items through your business, they’re 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 13.8% in 2023/24 and 2024/25.
  • You’ll pay tax on the BIK at your highest tax rate through your tax code. Your employer applies your tax code to your salary, affecting how much tax they deduct each month.

Across many UK industries, many people are in business for themselves. What’s more, many are employed in these industries. Indeed, they’ll work in their specific 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 your membership fees or subscription expenses. Indeed, if your contractor’s subscriptions benefit your business, you may receive a professional membership tax deduction.

If you’re self-employed or employed and your professional fees fall within those allowable, you can claim HMRC professional subscription tax relief via your Self-Assessment tax return.

To sum up

As with any business expenses, when you claim professional fees paid by the employer (your company), they must be `wholly and exclusively’ for your business. This rule applies to all business costs, such that the expense is just for your company and doesn’t contain any private element. What’s more, if we look at when subscriptions are tax-deductible, the cost shouldn’t have a `duality of purpose’. This means the cost isn’t part business and part private. If your subs do not meet either of these tests, you’ll not receive tax relief on subscriptions. Therefore, when you claim for business subs, it’s key no private element is part of this.

Further HMRC guidelines 

Guidance on an HMRC professional subscriptions tax deduction 

There are further guidelines from HMRC regarding business subs. Indeed, they’ll allow you to claim professional fees and contractor business subscriptions paid to approved professional bodies. Moreover, there’s an HMRC professional subscriptions list, which 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’ll be tax-free. On the other hand, if you’re self-employed, you can claim for such fees through your personal tax return.

HMRC official reference points 

If you want to claim your subscriptions through your tax return, please check this HMRC page on claiming job expenses. You can also view the HMRC customer forums for recent questions from visitors to their page. Furthermore, this HMRC online P87 page can be used to claim job expenses.

As a UK contractor, you have your own company. Therefore, let’s look at the HMRC guidelines regarding business subscriptions. Indeed, regarding 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’s payable to a body which 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 the professional fee is relevant to your line of work and the industry you work in. They also state that the subscription or fee benefits you as part of your work and is shown on the HMRC-approved list.

List 3 of approved HMRC bodies

As mentioned, HMRCapproved professional bodies 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 various industries, and their professional subs are tax-allowable. Moreover, the HMRC list of approved bodies is extensive but doesn’t 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’re now a member of who isn’t on the HMRC-approved membership list. If your contractor subscriptions professional body isn’t on the list, the official rule is you can’t claim these membership fees. As a result, you won’t receive a subscription tax deduction for this. Furthermore, if you put the claims through your business, you’ve 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.

How can you claim HMRCapproved subscriptions as expenses?

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.

Furthermore, you may be employed and pay your work subscription yourself rather than your employer. Therefore, in this case, you can claim these against your employment income on box 19 of your 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. Moreover, we explain when professional memberships are tax-deductible and what to think about here. As you can see, the rules here aren’t straightforward regarding what you can claim as subscription expenses. Neither is it obvious when your subscription fee will be tax-deductible. The HMRC professional membership list shows which bodies they approve of. However, what if your body isn’t on the HMRC list of approved professional bodies?

When you’re paying for business subscriptions as a UK contractor, if you’re:

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

Then, as the employer, your company 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 reduce your company’s tax bill.

Two such contractor professional fees aren’t on HMRC’s list 3. Indeed, these are the IPSE membership cost and LinkedIn subscriptions, among others. Both provide benefits for limited company contractors, and as a result, many claim for them. What is more, HMRC is very unlikely to disallow such claims.

Besides this guide on contractor limited company subscriptions, we have another great guide that covers tax tips for UK contractors. Here, we detail many things to consider when you plan to become more tax-efficient as a contractor. Moreover, our guide to UK contracting is worth a read, especially if you’re a new contractor.

Link to Contractor Advice UK group on

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

Published On: April 6th, 2024 / Categories: Expenses, Expenses Guides, First timer guide /

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