What are the P11D reporting requirements for payment of employees’ professional subscriptions?Monday, November 29th, 2010
The payment of an employee’s professional subscription or membership fees is a benefit in kind that must be reported on form P11D. It is, however, possible for an employer to obtain a dispensation if certain conditions are met.
Where membership is obtained by the employer
If the membership is obtained by the employer (i.e. the employer is invoiced for the subscription, not the employee), the cost incurred by the employer is reported in Section M Other items, on the Class 1A NICs line. The employer must pay Class 1A NICs on the payment.
However, if the employer is aware that the employee is entitled to a fully matching deduction from earnings, i.e. can claim tax relief in full for the amount reported, (see below), the employer may reduce the liability for Class 1A NICs on the subscription payment by using the adjustment facility in section 4 of the P11D(b) Return of Class 1A NICs.
There is no reportable benefit for a lower-paid employee, i.e. an employee with an earnings rate of less than £8,500, including the value of benefits and expenses.
Where membership is personal to the employee
If the employee is personally invoiced for the subscription and the employer pays the bill direct to the professional body, the amount of the payment is reported on form P11D in Section B Payments made on behalf of the employee or, if relevant, on form P9D in Section A(2) Any other payments or benefits. Class 1 NICs are due on the payment and the employer must add the payment to the employee’s gross pay (for NICs only) in the earnings period in which the bill is paid.
If the employee pays the subscription, the employer reimburses the employee and the payment does not qualify for tax relief, the payment is not reported on form P11D but is taxed through the payroll. The employer must calculate the “grossed-up” value of the payment, i.e. the amount which, after deducting tax and NICs at the employees’ rates, gives the amount that was reimbursed. This grossed-up up value is added to gross pay for both PAYE and Class 1 NICs in the pay period in which the reimbursement is made.
If the employer reimburses the employee and, as explained below, the payment qualifies for a fully matching deduction from earnings, the payment should not be made through the payroll. It is treated as a normal business-related expenses payment and reported in section N Expenses payments made to, or on behalf of, the employee. There is no P9D reporting requirement in this situation and no Class 1 NICs liabilities to consider.
Claiming a deduction from earnings
If the benefit has been reported on form P11D, the employee may claim a deduction from earnings (i.e. claim tax relief against the amount reported) if
- the employee is unable to hold the employment and practice the profession unless the payment has been made, or
- the payment is made to an approved body whose objectives are related to the practice of the profession.
In the first situation, the legislation lists the many professions that may not be practiced unless the employee is registered, certified or licensed. These are listed health professionals, animal health professionals, legal professionals, architects, teachers, patent and trade mark attorneys, various professions in the transport sector, occupations in the private security industry.
In the second situation, many professional Institutes have been approved by HMRC. They include the Chartered Institute of Personnel and Development (CIPD) and the Institute of Payroll Professionals (IPP).
The names of all of the professional bodies covered by the two situations above are listed in List 3.
An employer may be able to obtain a dispensation from HMRC if professional subscriptions are only ever paid in circumstances where the employee is able to claim a fully matching deduction from earnings. There is no reporting requirement if a dispensation applies. However, unless a dispensation for this purposes is held, the full reporting requirements, as described above for the various different situations, must be followed.