Claiming subscriptions through your company
For many contractors the
payment of subscriptions and professional membership fees are an essential expense. A Limited Company can pay or reimburse these costs for their employees in accordance with HMRC rules. As
Limited Company contractors are employees of their company, these costs can be treated in the same way.
Company paying contractor fees on their behalf
This is where the contractor’s company pays the organisation directly. The reporting and tax implications depend on both individual earnings and whether the professional body appears on HMRC’s approved list. This is known as ‘List 3’ and can be found on HMRC’s website.
If earnings are less than £8,500 per year
- The cost must be reported on form P9D – section A(2) – unless you have a dispensation covering this item
- Where the professional body is included in HM Revenue & Customs’ (HMRC’s) ‘List 3’ no tax or NICs are payable
- Where the professional body isn’t included in ‘List 3’ the value of the benefit must be added to the employee’s earnings when deducting and paying Class 1 NICs (but not PAYE)
As Limited Company contractors are usually directors of their company they will come under the rules for company directors and employees earning £8,500 or more per year
- The cost must be reported on form P11D – section M – unless you have a dispensation covering this item
- Where the professional body is included in HMRC’s ‘List 3’, no tax or NICs are payable
- Where the professional body isn’t included in ‘List 3’ the value of the benefit must be added to the employee’s earnings when deducting and paying Class 1 NICs (but not PAYE)
Company reimbursing contractor for fees paid
This is where the contractor pays the fees from personal income and then claims it back from their Limited Company. In this case the only difference is whether the professional body appears on HMRC’s ‘List 3’. If the professional body is included in ‘List 3’:
- The value of the benefit must be added to the employee’s other earnings when deducting and paying PAYE tax (but not Class 1 NICs) If the professional body isn’t included in ‘List 3’:
- The value of the benefit must be added to the employee’s other earnings when deducting and paying PAYE tax and Class 1 NICs
HMRC’s ‘List 3’
Even where the professional body appears in HMRC’s ‘List 3’ to be allowable it must be shown that the payment of the fee complies with the following criteria:
- A statutory fee or contribution must be paid out of contractor earnings from an employment and it must be a statutory condition of following their employment
- An annual subscription must be paid out of contractor earnings from an employment and the activities of the body must be directly relevant to their employment
If you are in doubt over the correct treatment of any subscriptions or professional fees , contact your contractor accountant for guidance.
This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.
