Professional subscriptions benefit in kind

Finance Act, 2011 removed the tax exemption from payments or reimbursements of professional subscriptions paid by an employer on behalf of employees. Professional subscription fees are now a taxable benefit and subject to PAYE, PRSI and USC.

However, it is still possible for an employer to pay an employee’s professional fees without a benefit in kind arising.  Each case must be examined on its own merits.

If it can be argued that the professional fees have been incurred “wholly, exclusively and necessarily” in the performance of the duties of an office or employment, it may be possible to pay the professional subscription without any tax issues arising.

The Revenue guidance states that while each case will be assessed on its own merits, it may allow a claim in respect of professional subscriptions where:

  1. There is a statutory requirement for membership of a professional body
  2. Where there is a requirement for a practising certificate or licence
  3. Other situations:
  • The employee’s duties require the exercise or practice of the profession
  • The employee exercises or practices the occupation or profession
  • Membership of the professional body is an indispensible tenure of the employment

The first 2 situations should be relatively straightforward. The “other situations” may be more difficult to assess. Legal interpretation may be required on the term “indispensible tenure of employment”. The implication is that this should be written into the terms and conditions of employment.

Employers should analyse what professional subscriptions they pay on behalf of employees. They should then analyse the roles in respect of which these subscriptions are paid and determine whether they meet the first 2 points of 3 above. If they do, then they need to determine whether the third point applies. This may be the most difficult requirement to meet. The employer would need to assess the benefits obtained from the professional membership, objectively determine whether those benefits received are indispensible.

Take an accountant employed in a business as an example. The employer pays the accountant’s membership subscription to the accountancy body. The employee’s duties include, preparing monthly accounts, budgets and forecasts, overseeing payroll, preparing annual financial statements. I think it is clear that the accountant’s duties require the exercise of the profession of accountancy, and that the employee actually exercises that profession. But is the membership of the accountancy body an indispensible tenure of the employment. One could argue that the accountant must have up to date knowledge of all latest developments in the accountancy profession, changes in accounting standards and guidelines and that membership of the professional body helps deliver this. However, it could also be argued that those benefits could be achieved outside of membership through normal training. That is why the third point may be the most difficult to achieve objectively.

I would look at it like this:

If you were to advertise the post you would state potential candidates should be members of the relevant professional body. For most professions that will ensure that candidates’ knowledge and training is current as they must adhere to continuing professional development regulations in order to retain membership. Membership of the professional body is therefore critical in ensuring that the right calibre of candidate is selected. I believe it would be unreasonable not to allow a subsequent deduction for payment of membership fees on that basis.

Revenue gives numerous examples in the guidance that can be found here.

Payroll deduction

Revenue has indicated that, to ease administration and to avoid unnecessary claims, where the tests above are met employers may make the payments without deducting tax on the notional amount. Where this happens employees cannot make a claim to Revenue for a refund of tax.

Revenue has stated that each case will be examined on its own merits, with that in mind it essential that the memberships and roles to which they relate are properly assessed, the assessments are documented along with opinion formed and conclusions arrived at. I would also recommend specific professional advice is sought in respect of all cases.

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