Revenue recently issued an e-brief (No. 19/11) to clarify the position for employers and employees in relation to professional subscriptions.

Background

Up to 31 December 2010, the payment or reimbursement of an annual membership fee of a professional body, on behalf of an employee, by an employer did not give rise to a taxable benefit-in-kind if membership of that professional body was relevant to the business of the employer.

The Finance Act 2011 removed the exemption for 2011 and future years, therefore, such a payment by employers will be deemed a taxable benefit-in-kind.

Following representations by various bodies, Revenue have now clarified the following:

• The extent to which a deduction may be available to an employee under the general rule governing employee expenses in respect of annual membership fees paid to a professional body; and
• The extent to which, for ease of administration, employers are not required to operate PAYE, PRSI and USC withholdings where such professional membership fees paid by the employer on behalf of the employee would be allowed as a deduction as an expense.

In general, a tax deduction is allowed in relation to expenses incurred wholly, exclusively and necessarily by an individual in the performance of the duties of his or her employment.

With regard to annual professional subscriptions, the Revenue e-brief (No. 19/11) states that whilst each case should be examined on its own facts and circumstances, Revenue will allow a tax deduction for the employee in the following circumstances for the tax year 2011 and subsequent years:

• Where there is a statutory requirement for membership of a professional body etc.
• Where there is a requirement for a practising certificate or licence.
• Other situations where membership fees of a professional body may be deductible.

The Revenue has confirmed that, under long standing practice, an income tax deduction is allowed in respect of the annual registration of membership fees paid by employers in the following instances:

• Individuals are required by statute to be registered members of a designated professional body, association, society, council, etc. before they can carry out the duties of their employment.
• a statutory provision may provide that an individual registered with, or a member of, a professional body, association, society, council, etc, has a right, by virtue of such registration or membership, to plead or be heard in representing a client of his or her employer before a court or tribunal.

Revenue is aware that there may be situations, outside of a specific statutory requirement, where individuals are required to have a current practising certificate or licence issued by a professional body, association, society, council etc. before they can carry out the duties of their employment.

The Revenue has again confirmed that, under long standing practice, an income tax deduction is allowed in respect of both the annual membership fees payable to such body, association, etc. and in respect of the cost of the practising certificate or licence where there is a requirement of that body, association, etc. that an individual must hold a current practising certificate or licence issued by it before that individual can carry out the duties of his/her employment in respect of which the certificate or licence refers.

Other situations where membership fees of a professional body may be deductible.

The Revenue has also confirmed that an income tax deduction will be allowed in respect of the annual membership fee payable by an employee to a professional body, association, society, council, etc. where all of the following conditions are satisfied:

• the duties of the employee and the duties of the employment require the exercise or practice of the occupation or profession in respect of which the annual membership fee refers; and
• the employee so exercises or practices the occupation or profession in respect of which the annual membership fee refers; and
• membership of the professional body is an indispensable condition of the tenure of the employment.

From 1 January 2011, Revenue have confirmed that, for ease of administration and to avoid unnecessary claims, an employer is not required to operate PAYE, PRSI and USC withholdings on annual membership fees paid to professional bodies, where:

• an employer pays or reimburses a membership fee to a professional body on behalf of an employee; and
• an income tax deduction would be available as outlined above.

Examples

Revenue has provided 11 examples of how the new rules apply. The examples are set out in Revenue’s e-brief No. 19/11.

Next steps for employers

• Revenue has stated that each case will be examined on it own facts and circumstances, therefore, it is important that employers put in place controls and procedures which can clearly identify the relevant employees and whether PAYE, PRSI and USC withholding should be operated on payments of annual membership fees of a professional body on behalf of such employees.
• Employers should review any professional subscriptions paid since 1 January 2011 to ensure that the correct tax treatment is applied to such payments in accordance with the new e-brief No. 19/11.

If you have any questions or require any assistance in relation to the above, please contact your usual Mazars contact.

Getting it wrong could result in interest and penalties!

Mazars,
Block 3 - Harcourt Centre,
Harcourt Road,
Dublin 2.

Telephone : (+353) 1 449 44 00
Fax : (+353) 1 475 00 37

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