The tax treatment of professional subscriptions

Whether you work as a freelance contractor, director of a limited company or business owner, joining a trade association can help to keep you up to date with what’s going on in your industry and be a useful forum for discussing new legislation, finding contacts, or sourcing work. Typically, you’ll have to pay an annual subscription to be a member.

But how is this yearly cost treated for tax purposes and what exactly determines when a subscription to a professional or trade association is a legitimate business expense that can be claimed back on your tax bill?

Claiming business expenses

The key rule when it comes to allowable business expenses is, in the words of HMRC:

…that the expense should be wholly, exclusively and necessarily incurred in the performance of your day to day business.

So, if you try to claim expenses for goods or services deemed to be for personal use, or joint use – such as a mobile phone in your name which you also use to make business calls – this will be treated as ‘duality of purpose’ or a so-called benefit in kind.

You’ll have to report this expense on a P11D form and pay personal tax on the value of the item or service. The company will also have to pay national insurance.

Professional and trade subscriptions

When it comes to claiming tax relief on professional and trade subscriptions, things are not so cut and dried.

You may be able to claim for your membership fee but only if it can be shown to provide a clear benefit to the business and is the only reason that you pay the annual subscription.

To quote HMRC again:

…you can reclaim tax you pay on fees or subscriptions to some approved professional organisations – but only if you must have membership to do your job or it’s helpful for your work.

It’s important to note, however, that this only applies if the professional or trade association’s name appears on HMRC’s List 3 of ‘professional bodies approved for tax relief’. You can check out List 3 here.

Is your trade association on List 3?

If you pay an annual membership fee to the Pain Society, the Institute of Parking Professionals or the Pensions Management Institute, for example, you’ll be able to make a legitimate claim on your tax return.

On the other hand, if you are a member of IPSE (Association of Independent Professionals and the Self Employed), as many contractors are, your fee is not tax-deductible.

This may seem odd considering that one in seven of the UK workforce is self-employed, but IPSE prefers not to submit its membership list to HMRC each year.

IPSE is treated in the same way as other professional associations such as the PFA (Professional Footballers’ Association) and the PGA (Professional Golfers’ Association), who don’t appear on List 3 either.

Interestingly, a recent ruling for tax purposes decided that in the case of the PGA, the purpose of membership was to help boost players’ earnings rather than enhance their golfing skills.

As a result, the tribunal upheld HMRC’s original ruling not to allow members to claim for tax relief on their annual subs.

For the record, a spokesperson for IPSE has been quoted as saying they could be recognised as a professional body for List 3 if they provide HMRC with a membership list, something they’ve said they are not willing to do.

Perks not included

Please note that even if your association does appear on List 3, you can’t claim tax back for life membership subscriptions, or for fees or subscriptions that you haven’t paid for yourself, for example, if you get the company to pay them for you as a perk.

Information and advice

The cost of an annual subscription may be relatively inexpensive compared to other business expenses, but still worth claiming for.

For more detailed information, click here, or chat with your accountant.

Read our full guide to business expenses here.

Tax-efficient protection for directors

  • limited company life cover