You’ve joined a club/association for local businesses – are your membership costs tax-deductible?

If you have joined a local business club/association, the line between ‘business’ and ‘pleasure’ is likely to get crossed regularly. Although your joining was motivated by work reasons, there tends to be a social aspect to the meetings. So, do your membership fees qualify for a tax deduction?

If a meeting has any aspect of ‘business entertainment’, HMRC will not allow tax-deductions. But it is unlikely that you’ll be getting together with other business owners or managers without food and drink being served.

Whether it’s an association you have started, or one you have signed up to, there will usually be costs involved, paid for by member subscriptions. If you are joining with others in a not-for-profit arrangement, HMRC will view expenditure, which is paid for from members subscriptions, as if each of you incurred the cost directly. Costs for admin – including hiring venues for meetings – are tax-deductible because they have a business purpose. Also, unspent subscriptions tend to be treated as though they have been allocated to meet business costs. Just a note: not-for-profit business clubs/associations usually have to register for corporation tax.

Some good news…

When an expense has been used for a purely social, and therefore non-tax-deductible cost, you might think HMRC would disallow part of a subscription to be tax-deductible. But unless it is a huge amount, they do tend to ignore it.

What about a breakfast meeting? If subscriptions are used to pay for all or part of the cost, as long as all members attend, even virtually, there is unlikely to be a problem there either. ‘Entertainment’ means expenses incurred by one person/business in respect of another. If it is the members’ subscriptions covering the cost of food and drink, that is fine.

However, if there is a huge variation in the number of people who attend on each occasion, and yet food and drink is being funded out of all member subscriptions, HMRC may quibble, as it’s as if those not in attendance are subsiding the cost of meals etc. for those who are. In such cases, HMRC could reasonably argue that some of your subscriptions are not tax-deductible. Maybe you could avoid this scenario of disallowance on such occasions with a separate charge to cover food and drinks etc. There may be another tax deduction applicable, for example for travel to attend the meeting, which could be claimed directly. 

Joining a local club or association is a great way to network as well as promote your business. For full guidance on what parts of your membership could be tax-deductible, and which might be queried by HMRC, get in touch with our expert team.

For help with business or personal tax planning, call Figurit on 020 7376 933 or complete the form below.

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