GES Newsflash February 2018

PAYE – employee professional body membership fees  

Last month, Revenue updated their guidance regarding circumstances in which membership fees paid to a professional body are tax deductible.  Where tax deductible, PAYE need not be applied when the membership fees are paid by an employer.  In summary, the guidance appears to represent a more strict Revenue interpretation of the rules which would result in certain membership fees no longer being treated as qualifying for tax relief.

The paragraphs below give an overview of the historic position before going on to comment on the new updated Revenue guidance.

Historic position

Up to 2010

Up to 2010, membership fees of a professional body, incurred by employers in respect of employees, were exempt from tax where the membership was regarded as relevant to the business of the employer.

2011 to 2017

The law was changed with effect from 2011 to remove the general exemption for cases where the membership was relevant to the business of the employer. This meant that, from 2011, membership fees were only allowable in cases where the fees were incurred “wholly, exclusively and necessarily” in the performance of the duties of employment.

Revenue issued guidance in 2011 setting out their view of the conditions to be satisfied in order for the “wholly, exclusively and necessarily” test to be met.  The conditions outlined were as follows:

a) Where there is a statutory requirement for membership,
b) Where there is a requirement for a practicing certificate or licence, and
c) Certain other situations.

To qualify under (c), three conditions had to be met:

1. The duties of the employee and the employment require the exercise or practice of the occupation or profession;
2. The employee so exercises or practices the occupation or profession; and
3. Membership of the professional body is an indispensable condition of the tenure of the employment.

Revenue provided 11 examples with regard to the above circumstances. One of these examples related to an in-house accountant whose membership fee of an accountancy body was allowable as membership was an “indispensable condition of the tenure of her employment”.

In practice, when dealing with Revenue, it has been difficult to get their agreement that the conditions as set out above were met. 

Updated Revenue guidance


The new guidance reiterates the position set out in the 2011 guidance in relation to conditions (a) and (b).

However, condition (c) appears to have been replaced with a condition that is met where:

“certain statutory provisions may restrict the ability of an individual to fulfil the full duties of an office or employment unless they are members of a relevant professional body.”

This could be interpreted as representing a significant narrowing of the Revenue view as to when the “wholly, exclusively and necessarily” test is met.

The example in the new guidance relates to an employee of a professional firm who is member of a taxation body. The employee may be required to appear and plead on behalf of the firm’s clients before the Tax Appeals Commission. Therefore, the taxation body membership fee may be treated as allowable. 

Two subscriptions

Another example relates to a situation where an employee of a professional firm who is member of both an accountancy body and a taxation body. Again, the employee may be required to appear and plead on behalf of the firm’s clients before the Tax Appeals Commission.

As both bodies are recognised as allowing their members a right to be heard before the Tax Appeals Commission, it is not necessary for her to have both memberships in order to be heard. The Revenue position is that one of the membership fees should not be treated as allowable. Where both fees are paid by the employer, PAYE should be applied to one of them.

The guidance does not address a situation where membership of two similar bodies might be required, e.g. to operate in two different jurisdictions. Where such cases arise, the individual circumstances should be considered.

Deloitte view

The apparent narrowing of the Revenue view as to when a professional subscription qualifies for tax relief is not welcome.

For example, it does not seem to take account of the fact that companies, in particular listed entities, have legal obligations towards shareholders and other stakeholders to ensure that financial information is reported correctly. Aside from negative reputational issues, penalties can apply where incorrect information is reported.

In the current business environment, a lot of companies would view membership of appropriate professional bodies by certain employees as a necessity. 

That said, professional subscriptions are giving rise to issues in PAYE audits. The new guidance reflects the fact that this is an ongoing focus area for Revenue. Therefore, employers should review their existing policies and procedures regarding the payment of fees to professional bodies on behalf of employees.

Please contact a member of your GES Client Service Team should you wish to discuss this area further. 

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