Legislation (Part 5 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA)) allows for certain deductions to be made from the pay on which Income Tax is calculated, i.e. net taxable pay. This includes, for example, the reimbursement of business expenses. Sections 343 and 344 of the 2003 Act allow for professional membership fees and annual subscriptions to be provided free of tax and National Insurance in the following instances:
- It is paid to a body that has HMRC approval; 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
The full list of professional bodies that have the necessary HMRC approval is published in a document known as ‘List 3’ (where ICB is listed as ‘Institute of Certified Bookkeepers’). It is important that employers look for updates to this list as the professional impacts of a body appearing on it are:
- Employers may reimburse fees and subscriptions without P11D consequences; and / or
- Where the employer has not reimbursed the fee / subscription, taxpayers can claim Income Tax relief on the sum they have paid
Guidance on Gov.UK indicates the way in which tax relief can be claimed by the taxpayer:
- The ‘Check if you can claim work related expenses’ link allows the taxpayer to enter the value of a fee / subscription that has not been covered by the employer. However:
- If the taxpayer is registered to complete a Self-Assessment tax return, tax relief must be claimed in this way. This also applies if the taxpayer is claiming tax relief of more than £2,500 in a tax year (in which case, the taxpayer must register for Self-Assessment)
For Bookkeepers
Income Tax is a personal responsibility, and this does not change even if you are processing the payroll for employers. However, if you are dealing with expenses reimbursements and P11D declarations, knowledge of List 3 and the importance of keeping updated with the bodies on it may save some unnecessary P11D administration.
Similarly, if you are responsible for the completion of Self-Assessment returns, the frequently updated List 3 may detail a professional body where tax relief can be claimed.
Note that claims can be made for the current tax year and the four previous tax years.
