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Many people pay subscriptions and similar payments with a business motive. Sometimes the expenses are incurred by an individual or alternatively they may be paid directly by the business.  The tax treatment of these payments is important and there are a number of possibilities depending upon the type of expense.  Some of the key factors are as follows:

Wholly and exclusively - One of the fundamental requirements for tax deductibility of expenses in a business is that they must be "incurred wholly and exclusively for the purposes of the trade" [section 34 of Income Tax (Trading And Other Income) Act 2005]. There are exceptions to this where:

  • The expense is specifically disallowable by tax statute (eg entertaining expenses)

  • The expenses is capital in nature (eg professional fees on acquisition of an asset)

  • The expenses is deductible  only when paid (eg pension contributions or gift aid)

  • The expense is governed by special rules (eg car scale rates).


This means that subscriptions for publications, clubs and other organisations can be claimed for tax relief purposes if the business purpose can be justified.

Expenses with a private element - Some subscriptions can be justified only partly for business purposes.  Examples might be a telephone landline rental charge for which some call are made for private purposes.  HM Revenue & Customs (HMRC) allow an exemption when the employer's sole purpose in providing the telephone is to enable the employee to perform their duties and the employee's private use of the benefit of the telephone is not significant. This follows a court case regarding telephone rental costs [Lucas v Cattell] and the exemption will apply where:

  • there is a clear business need to provide the employee with a telephone, and

  • the employer monitors, controls and minimises the cost to him/her of private use, and

  • the employer has no intention to reward the employee.


Expenses incurred by employees - It is common for employers to reimburse employees who incur costs related to the business.  The tax rules state that such expenses can be claimed by employees if "the employee is obliged to incur and pay it as holder of the employment", and the amount is incurred wholly, exclusively and necessarily in the performance of the duties of the employment. [section 336 of Income Tax (Earnings And Pensions) Act 2003].  This extra condition of "necessarily" incurred is crucial in many instances of employees' expenses and was explored in relation to clothing of a barrister at work in the case of Mallalieu v Drummond.  HMRC will vigorously resist claims for tax relief where they feel the necessarily condition has not been met.

Just to make life even more complicated, there are additional rules applying to national insurance contributions on reimbursements made to employees and the contractual obligations of such expenses may affect the overall tax liabilities.



As with all such tax situations, advice should also be sought before proceeding.

For further details call Alan Boby on 01295 250401 or email aboby@ellacotts.co.uk

Alan Boby

Ellacotts LLP

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