Expenses – how professional subscriptions / memberships are treated

How are subscriptions to professional and trade organisations treated for tax purposes, and what determines whether or not your membership of a particular organisation is tax-deductible?

Expenses basics

As with all types of business expenses, you can only claim for costs incurred wholly and exclusively for the purpose of carrying out your trade.

If you claim for anything which is for your own personal use, or joint use (i.e. it has a ‘duality of purpose’), you will have to pay extra personal tax on the value of the product or service, and your company will incur an Employers’ National Insurance liability on the benefit.

Professional / Trade Subscriptions

Many contractors and business owners are members of trade associations – either those specific to an industry sector, such as the British Computer Society, or general representative organisations such as the Institute of Directors (IoD), or IPSE.

Your company may be able to pay the cost of membership, with no tax implications if your membership is providing a benefit for the business (and you would not otherwise have joined as an individual).

According to HMRC EIM32900, the costs of membership are tax-deductible if “the activities of the body are of direct benefit to, or concern the profession practised in, the performance of the duties of the employment.”

Importantly, subscription fees are tax-deductible only if the organisation appears on HMRC’s approved ‘List 3’ – Approved professional organisations and learned societies.

You can browse the list here.

There have been several instances where professional associations have not been approved by HMRC, the most recent being the Professional Golfers’ Association (PGA). In a recent case, the First Tier Tribunal decided that the main purpose of PGA membership was to increase members’ earning potential, rather than improving their golfing ability, and upheld HMRC’s decision to disallow members to claim tax relief on their subscriptions.

Interestingly, leading freelancers’ trade association, IPSE (formerly PCG) is not on the HMRC approved list.

As most of our visitors are contractors, we asked the organisation why this is the case:

Chris Bryce, IPSE’s Chief Executive told us:

“If you use a limited company, your company can pay your IPSE membership fees, but they will not be a deductible expense from your profits and therefore won’t affect your corporation tax bill.

“The reason IPSE fees aren’t deductible is that HMRC rules state that only recognised professional bodies fees are deductible from corporation tax. IPSE could become recognised but if we did that we would have to agree to give HMRC our membership list every year. We won’t do that.”

Further Information

One final thing to note. On the rare off-chance that it is relevant to you, life memberships are not eligible for tax relief!

For more technical details on the tax treatment of professional subscriptions, refer to HMRC EIM32915.

If you have any questions about expenses in general, make sure you discuss them with your accountant or umbrella company provider.