PCG Subscription Handling - Not allowable for corporation tax

Thanks. I've e-mailed that to you Ed. It looks like the same principles will apply to other professional subscriptions - some are allowable and some are not. So it may be worthwhile having two subscription catagories. It doesn't effect me immediately as I'm a long way from the year-end but you're right - if I pretend it's business entertaining it all works OK.

Actually, thinking about this some more, rather than mess about with having more catagories, perhaps the thing to do is have a 'Corporation Tax' option against each explanation, with 3 options 'allowable' 'disallowable' and 'Auto'. Auto would be the default option and whether it is allowable or disallowable would be determined by the catagory of expense selected (whether that kind of expense is normally allowable or not.) This would be similar to how you do the VAT.

Peter.

Can you post a link to this information on (non)allowable for corporation tax. reading this thread looks like I have accounted for the PCG subscription incorrectly.

I agree with the comments about the Memberships and wrote about this a few weeks ago http://www.bfca.eu/blog/?page_id=1429 . Its actually not just the PCG but other membership organisations that are affected, but there is a list of HMRC approved organsiations that you can deduct against tax.

PCG members can request the document, I do not think its available as a link.

I would also put into Business Entertaining and treat it as described.

I should be grateful if you could forward to me the documents that you refer to "*If you really want to know, I can e-mail you the document that describes why."

Thank you
d.bowen@watts-gregory.co.uk

Any update on this? My PCG membership just came up for renewal so I guess I'll categorize it as "Business Entertaining" to keep the corp. tax records straight but a checkbox to mark an expense as not allowable for corp. tax would be handy.

I have had correspondence with Abbey Tax teh providers of tax advice to PCG, at PCG's recommendation and this is their response: -

The article seems to discuss the disallowability of the payment, however just to summarise, if the membership is in the individuals name and then the company pays it directly, it would be a P11d benefit, or alternatively if they pay the employee money for the membership it would be taxable through the payroll, in both cases this would then allow the company to claim a deduction.

However, if the subscription is in the company name then the company will get no deduction but it will then not be a benefit in kind for the employee.

Subscriptions to PCG: the full story
PCG is what is called by HMRC a “trade protection association” – that is, an association formed to protect the common interests of its members and funded by their annual subscriptions.

Many years ago (1913, actually) a member of a trade protection association went to court to claim tax relief for its contributions. If anyone’s interested, it was the Lochgelly Iron & Coal Company Ltd (based, incidentally, in what is now the parliamentary constituency of one Gordon Brown) and the company was paying subscriptions to the Fife and Clackmannan Coalowners’ Association. The Court of Session decided that although the subscription was not deductible as such, the company could “look through” the Association and have tax relief for that part of their subscription which was applied by the Association towards expenditure which would have been allowable had it been incurred directly by the company itself.

Two years later the Grahamstown Iron Company of Falkirk (a place incidentally where the Scots were heavily defeated by the English in 1298 but won the re-match in 1746) were in court claiming relief for their subscriptions to the National Light Castings Association. However, unlike Lochgelly they did not have the Association’s accounts to hand and were unable to demonstrate what their subscriptions had in fact been spent on. The company lost its case and the principle was established that a member of a trade association could not get tax relief for its subscription without exhibiting the accounts of the association itself.

To avoid the need for all members of an association individually to negotiate with HMRC what proportion of their subscription is tax-deductible under the principles established in the Lochgelly and Grahamstown cases HMRC offer a non-statutory “arrangement”. Under this they will allow members to have tax relief for the subscription provided the trade association accepts liability to Corporation Tax on the excess of its receipts over its payments (subject to some limitations). This is the only non-statutory arrangement which HMRC will contemplate: in particular what you might think would be the obvious solution (namely, agreeing with an Association what proportion of the subscription has been spent on things which would have been tax-deductible if incurred directly by the member, and then allowing tax relief to the member for that proportion of his subscription) is not on offer.

In recent correspondence with PCG, HMRC made it clear that before agreeing to enter into the arrangement with PCG they would wish to have details of membership. The Board of PCG considered that it would not be in the interests of members for details to be provided to HMRC and as a result the arrangement is not available to PCG.

The advice that the Board have had is that the strict legal position in this area is completely clear, having been established many years ago by the cases cited above. As a matter of law, any appeal against the way in which HMRC administer a non-statutory arrangement could only be by way of judicial review, of which the outcome would be uncertain and of which the cost is considered to be out of all proportion to the benefit to PCG and its members.

Members who wish to confirm the position for themselves may want to look at the HMRC website http://www.hmrc.gov.uk/manuals/bimman...

Short answer: either take a chance and claim it as a company expense or cut your losses and avoid the hassle by not bothering to claim it. For the sake of £138 a year, I'm not convinced its worth it.