Employment Tax – Professional Subs Update
Employment Tax Update, Winter 2012
There have been significant changes in the tax treatment of professional subscriptions in recent time. This article aims to examine how employers are dealing with professional subscriptions following these changes.
While there is no longer a blanket tax exemption for professional subscriptions, the Irish Revenue do accept that relief would be allowed in certain situations where an individual would be entitled to claim a deduction for an expense incurred for the professional subscription where it is “wholly, exclusively and necessarily” incurred in the course of the employment.
While Revenue stated that each case should be examined on their own facts and circumstances they have set out details of the situations in which a tax deduction would be available to an employee in respect of the professional membership fees incurred.
Broadly, the situations in which a deduction is available are as follows:
- Where an individual is required to hold a current practising certificate or licence before they can carry out the duties of employment, a tax deduction will be available to an employee in respect of the cost of both the annual membership and the practising certificate or licence.
- Other situations where a tax exemption may still be available, are:
- Where the duties of employment require the exercise/practice of the occupation/ profession in respect of which the annual membership fees refers; and
- The employee so exercises/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.
Once the above conditions are met there will be no obligation on an employer to deduct PAYE/PRSI/USC from the payment or reimbursement of such fees. This also means that the employee is not required to submit a claim to Revenue in respect of the expense deduction.
How are employers dealing with the changes?
Employers have been reviewing professional subscriptions paid on behalf of their employees to ensure that the correct tax treatment is being applied.
Deloitte has been working with employers to draft policies and procedures which clearly identify those professional subscriptions which are tax exempt and those which may have a tax liability associated with them. As part of this process, expense claim forms are being revisited to introduce appropriate sign off procedures, where employees are requested to confirm that the professional subscription being paid or reimbursed is still relevant to their role and that the membership is necessary to their employment. Any organisations whom have not undertaken this type of review would be strongly advised to do so without delay.
In an age where many companies are revisiting employee terms and conditions of employment to ensure a sustainable future for their business, an opportunity presents itself to introduce clauses relating to professional subscriptions to ensure no tax issues will arise. Some employers may now wish to include a clause stipulating that the role is (and always has been) conditional on membership of the relevant professional body. This issue should also be considered when drafting new contracts of employment in new hire situations.
How Deloitte can help
If you would like information as to how Deloitte can assist your organisition to minimise tax risk, to identify cost control or process improvements, to resolve potential compliance issues or employee communications please contact:
+ 353 1 417 2406
+ 353 1 417 1 5709