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 run your own business, when are professional subscriptions tax-deductible? Let’s consider what’s the HMRC professional subscriptions meaning and what are professional subscriptions. 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. What’s more, when you’re contracting, most professional bodies or learned societies charge annual contractor professional fees in return for being a member. Furthermore, there’s also a HM Revenue & Customs (HMRC) professional subscriptions list which covers which fees are allowable.

If you’re claiming tax relief on professional subscriptions, when are business subscriptions tax-deductible? In this guide, we’ll research this and find out when you can save tax on these expenses through your business. You can refer to HMRC approved list of bodies and check this to see if your trade body is on here. Therefore, let’s look 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 types of 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 for professional subscriptions that you pay to certain bodies of whom you’re a member? In this guide, we’ll research when are such fees tax-deductible and when are subscriptions taxable. Further, we’ll look at allowable HMRC subscriptions to professional bodies. We’ll also investigate 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’ll 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’ll research 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’d only have the membership if it relates to the type of work you do.

Where you can’t claim for contractor subscription costs

Under HMRC guidelines, there’s also some membership fees which you can’t claim tax relief on. 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 type of professional fees or subscriptions through your company as a cost, you’ve to 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 per year, after the end of the tax year. 

More thoughts on HMRC professional subscriptions

Other factors around allowable business subscriptions 

When you’re in business for yourself, it’s a fact that you can’t claim tax relief on any private costs. What’s more, you can’t 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 HMRC professional subscription tax relief via your Self-Assessment tax return.

To sum up

As with any other business expenses, when you’re claiming professional fees 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 shouldn’t 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’ll not receive tax relief on subscriptions. Therefore, when you claim for business subs, it’s key that no private element is part of this.

Further HMRC guidelines 

Guidance around a HMRC professional subscriptions tax deduction 

There are further guidelines from HMRC in respect of business subs. Indeed, they’ll 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’ll be tax-free. On the other hand, if you’re self-employed, you can claim for such fess through your personal tax return.

HMRC official reference points

If you are looking to claim for your subscriptions through your tax return, please check this HMRC page on claiming for your 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 for your job expenses.

As a UK contractor, you will have your own company. Therefore, let’s view guidelines from HMRC regarding business subscriptions. 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’s 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’s 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 list of approved bodies is quite extensive, but it 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 aren’t on the HMRC approved membership list. If your contractor subscriptions professional body aren’t on the list, the official rule is that 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.

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.

Furthermore, you may be employed and pay your own work subscription, rather than your employer. 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. 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’re:

  • 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’ll help to reduce your company’s tax bill.

There’s two such contractor’s professional fees and subs that aren’t on the HMRC’s list 3. 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. What’s more, our guide to UK contracting is also 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: January 4th, 2024 / Categories: Expenses, Expenses Guides, First timer guide /

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