Professional subscriptions

Conditions

1. For a sole trader, GOV.UK's self-employed expenses guidance lists trade or professional journals, and trade body or professional organisation membership if related to your business, among the costs you can claim as allowable expenses. It says you cannot claim for payments to political parties, gym membership fees or donations to charity.
2. The statutory test is section 34 ITTOIA 2005 for sole traders and section 54 CTA 2009 for companies: no deduction for expenses not incurred wholly and exclusively for the purposes of the trade, but no bar on an identifiable part or identifiable proportion of an expense that is. HMRC says subscriptions are only allowable if they are incurred for the purposes of the trade and for no other reason, and that many are made from motives that are too general or personal to justify a deduction (BIM37500).
3. How much a business deducts depends on the body. HMRC says annual subscriptions to a professional institute or society, membership of which gives the right to use a qualification, may be allowed where profits from the profession are chargeable on the member (BIM47415). For a trade association, the member deducts the part of the subscription the association applies to expenditure that would have been deductible if the member had incurred it (BIM47420), unless the association has adopted HMRC's arrangement, under which entrance fees, subscriptions, levies and other payments (other than loans or payments of a capital nature) are allowed in full (BIM47425). For a local association such as a chamber of trade, HMRC says the absence of an HMRC arrangement should not be taken as grounds for disallowing a fixed annual subscription (BIM47430). For a local trade association, HMRC also says ordinary annual subscriptions by non-members are normally admissible as sums laid out wholly for the purposes of the subscriber's trade with members of the association (BIM47430). HMRC says fixed annual subscriptions to an association outside the UK may normally be allowed in the absence of any evidence of inadmissibility (BIM47430). HMRC says a deduction may also be made, on the grounds indicated in BIM47430, for annual subscriptions to local professional societies or branches of societies whose objects are mainly professional (BIM47415).
4. For a professional institute or society, HMRC says fees for entrance or admission are not admissible in the normal course (BIM47415).
5. List 3 is HMRC's list for the employee deductions in section 343 ITEPA 2003 and section 344 ITEPA 2003 (EIM32881). HMRC's trading guidance says the principles for subscriptions follow those for deductions generally (BIM47400), so a sole trader or company applies the test above rather than List 3.
6. Where a company pays a subscription for a director or employee, GOV.UK says the employee cannot claim relief on fees or subscriptions they have not paid themselves. How the company's payment is treated for tax is a question for its accountant.
7. An employee cannot use the general employee expenses rule in section 336 ITEPA 2003 for professional subscriptions: HMRC says the expenditure is not incurred in the performance of the duties, but a deduction can be given if the conditions of either section 343 ITEPA 2003 or section 344 ITEPA 2003 are met (EIM32880).
8. Section 343 ITEPA 2003 covers professional fees listed in a table in the section, such as entry in the register maintained by the Nursing and Midwifery Council or a solicitor's practising certificate. The fee is deductible if the duties of the employment involve the practice of the profession to which it relates, and the registration, certification, licensing or other matter is a condition, or one of alternative conditions, which must be met if that profession is to be practised in the performance of those duties.
9. Section 344 ITEPA 2003 covers annual subscriptions. One is deductible if it is paid to a body approved by HMRC and the activities of the body are of direct benefit to, or concern the profession practised in, the performance of the duties of the employment (EIM32900). Approved bodies are shown in List 3. List 3 also shows the first year for which relief is admissible for each body (EIM32881). Where a body's activities are to a significant extent directed to other objects, HMRC may allow only part of the subscription (section 344 ITEPA 2003), and HMRC says members will have been informed of the amount admissible by the bodies concerned (EIM32881).
10. A body missing from the list is not always excluded. HMRC says a body that has only recently been approved may not appear in the current edition of List 3, but a member will be entitled to a deduction (EIM32881). If a body applies for approval and is approved, a subscription paid to it before it applied but in the same tax year as the application, or after it applied but before it is approved, is treated as paid to an approved body (section 344 ITEPA 2003).
11. GOV.UK says an employee cannot claim tax relief on life membership subscriptions, or for professional membership fees or annual subscriptions they have not paid themselves (for example, if the employer has paid for them), or paid to professional organisations that are not approved by HMRC. HMRC's manual lists an entrance fee or a life membership subscription among the payments for which a deduction may not be given, and says a deduction may not be given for a subscription borne by the employer unless the employer's payment is treated as earnings (EIM32915).
12. Where someone is both employed and self-employed, HMRC says a deduction should not be allowed both in computing trading income and from employment income for the same fee, contribution or subscription (EIM32915).

Common mistakes

• Claiming a membership taken for general or personal reasons. HMRC says many subscriptions are made from motives that are too general or personal to justify a deduction (BIM37500).
• Deducting the whole subscription to a trade association you are a member of that has not adopted HMRC's arrangement, where it is not a local or foreign association (BIM47430). The allowable part is what the association applies to expenditure that would have been deductible if the member had incurred it (BIM47420).
• Employees assuming an essential membership is deductible under the general employee expenses rule. HMRC says section 336 does not apply; relief comes through section 343 ITEPA 2003 or section 344 ITEPA 2003 (EIM32880).
• Assuming a body missing from List 3 can never qualify. A recently approved body may not appear in the current edition, and its members are still entitled to a deduction (EIM32881).
• Assuming List 3 applies to the self-employed. It is the list for the employee deductions in section 343 ITEPA 2003 and section 344 ITEPA 2003 (EIM32881); a business subscription is tested on its purpose.
• Employees claiming an entrance fee or a life membership subscription. Neither qualifies (EIM32915).
• Claiming the same subscription against both self-employed profits and employment income (EIM32915).

What to keep

• Subscription invoices or receipts.
• GOV.UK says that when an employee claims, they must send copies of receipts, or other evidence, that show how much they paid for each professional fee or subscription.
• For an employee, a note of the body's entry on List 3, and of any allowable part of the subscription the body tells its members.
• For a business, a note of how the membership relates to the trade.

Real-world example

An accountant practising as a sole trader pays an annual subscription to her professional institute, membership of which gives her the right to use her qualification. HMRC says such subscriptions may be allowed where profits from the profession are chargeable on the member, so she deducts it from her trading profits; the entrance fee she paid when she first joined was not admissible in the normal course. Her colleague, employed by a firm, pays the same institute's subscription himself. He cannot use the general employee rule, but the institute is on List 3 and membership is relevant to his job, so he claims under section 344 ITEPA 2003 for the amount the institute tells members is allowable.

Frequently asked