From the years 2004 to 2010, a specific tax relief allowed an employer to pay/reimburse as tax-free the annual professional membership fees on behalf of employees where the membership was regarded as “relevant” to the business of the employer. This relief was removed from 2011 onwards with the result that professional membership fees paid/reimbursed by an employer will only qualify as tax-free in the hands of an employee under general principles, i.e., where the fees are incurred “wholly, exclusively and necessarily” by the employee in the performance of their duties.

Revenue issued an e-brief on the issue in 2011 to confirm their view of the circumstances in which professional membership fees could be paid or reimbursed as tax-free in the hands of an employee.

This applied where:

a) there is a statutory requirement for membership of the body,
b) there is a requirement for a practising certificate or licence to undertake duties of employment, and
c) Certain other situations as follows:

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

Revenue has published updated guidance in January 2018 on the circumstances in which it considers the payment/reimbursement of professional membership fees to be tax-free. While there is confirmation that professional membership fees may continue to be paid/reimbursed in respect of the circumstances outlined in a) and b) above, the updated guidance does not explicitly state that the situations for the tax-free payment/reimbursement outlined in c) are still applicable. Instead, Revenue’s view is that the tax-free payment/reimbursement of fees will apply where membership of a body enables an individual to perform the full duties of employment, even in cases where there is no statutory requirement to be a member of the body. For example, this would apply to an employee of a professional firm who is a member of a taxation body. While there is no statutory requirement to be a member of the taxation body to be a tax practitioner, membership of the body confers a right on the employee to appear and plead on behalf of the firms’ clients before the Tax Appeals Commission. In the absence of this right, the employee could not perform the full duties of employment as a tax practitioner. As such, payment/reimbursement of the professional membership fee in this instance is considered by Revenue to be tax-free in the hands of the employee.

The updated guidance also outlines Revenue’s view that payment/reimbursement of dual membership fees on behalf of employees will not be considered as tax-free if membership of the dual bodies confers the same statutory privileges on employees. This would apply, for example, where an employer pays membership fees on behalf of an employee to both an accountancy and a taxation body, the membership of each confers a right on the employee to appear before the Tax Appeals Commission. Revenue’s view is that payment of one of the membership fees would not be considered to be tax-free as it would not be considered “necessary” in the circumstances. It is unclear how Revenue would view the position if the requirement to be a member of both professional bodies is an express term in a contract of employment.

In practice, the circumstances in which an employer may pay/reimburse the cost of professional membership fees on behalf of employees may not be clearcut. As outlined above, there is a particular risk for employers who pay more than one professional membership fee on behalf of certain employees, as it may prove difficult to obtain Revenue agreement in the event of an audit that the payments may be considered tax-free. For now, we recommend that employers who pay professional membership fees carry out an exercise to determine if the payment(s) may be considered tax-free in light of Revenue’s updated guidance and seek confirmation on the position from Revenue in the event of any uncertainty. 

 

If you have any questions in relation to the above, or if you would like to discuss this topic further, please do not hesitate to contact a member of the Mazars employment tax team below:

Frank Greene

Tax Partner

 fgreene@mazars.ie

(01) 449 6415

Ken Killoran

Tax Director

 kkilloran@mazars.ie

(01) 449 4451

John Kelly

Tax Manager

john.kelly@mazars.ie

(01) 449 4495

       

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