Can you claim PCG sub as IR35 expense?

[ittony]

It's not allowable against CT because PCG has already paid the CT on the membership income and you can't do it twice

Uuuuuuuuuuuumm.... eh?

You're saying:

a. It's not allowable against CT, i.e. MyCo has to pay CT on it.
b. PCG has already paid CT on it.
c. You can't do it twice.

Pick any two, surely?

[THEPUMA]

Eh? That's a bit of a strange way of approaching it. If it's not a benefit-in-kind then surely it must be allowable as an expense claim. Surely allowable-as-expense-claim and is-benefit-in-kind are mutually exclusive?



You seem to have arrived at the diagonally opposite conclusion to the official PCG line, i.e. they say it's not allowable against corporation tax but it is allowable as an expense claim (i.e. not a benefit in kind if paid by the company), but you say it is allowable against corporation tax but not as an expense claim.

What it it with accountants and getting a straight answer?

There are 2 possible different scenarios. Either the expense is paid by the employee, in which case the wholly, exclusively and necessarily rules apply OR the company pays it directly, in which case we need to decide whether or not it is a benefit-in-kind by referring to List 3.

Either way, I think it is taxable.

I think I've given a pretty straight answer. I am consistently disagreeing with Malvolio's version of the PCG line. I may be wrong and he may be right, but that would be a first!

And I agree Ittony, his subsequent post makes no sense at all to me. I'm not sure what you can't do twice but certainly one company can receive income and pay tax on it while another can pay an expense and get tax relief on it.

The only sensible interpretation I can think of is that PCG DOESN'T pay corporation tax on its income, being a not-for-profit members' organisation. That would kind of be consistent with it not being a corporation-tax deductible expense but wouldn't mean it wasn't a BIK.

[malvolio]

OK, I shall go back to the horse's mouth, and ask for a definitive answer.




Bet I'm right though...

[THEPUMA]

OK, I shall go back to the horse's mouth, and ask for a definitive answer.




Bet I'm right though...

there's got to be a first time!

[malvolio]

there's got to be a first time!

Careful. My track record over the last five years is actually quite good...

However I admit I am no longer an accountant and certainly not as well qualifed as your good selves. Let me go dig out the detail on this subject and we can argue from a position of knowledge rather than incomplete conjecture...

[ittony]

There are 2 possible different scenarios. Either the expense is paid by the employee, in which case the wholly, exclusively and necessarily rules apply OR the company pays it directly, in which case we need to decide whether or not it is a benefit-in-kind by referring to List 3.

Either way, I think it is taxable.

I think I've given a pretty straight answer. I am consistently disagreeing with Malvolio's version of the PCG line. I may be wrong and he may be right, but that would be a first!

And I agree Ittony, his subsequent post makes no sense at all to me. I'm not sure what you can't do twice but certainly one company can receive income and pay tax on it while another can pay an expense and get tax relief on it.

The only sensible interpretation I can think of is that PCG DOESN'T pay corporation tax on its income, being a not-for-profit members' organisation. That would kind of be consistent with it not being a corporation-tax deductible expense but wouldn't mean it wasn't a BIK.

Sorry, I didn't mean to imply your answers were internally inconsistent, just I never seem to get the same answer from two accountants.

Anyway, pending Malvolio's further enquiries, I think it must be the case that PCG doesn't pay corporation tax on the fees and therefore members have to, as you speculate in your last paragraph. And while I agree that this doesn't imply it's not a benefit in kind, I maintain that it's most certainly not a benefit in kind anyway, and therefore can either be paid by the company or paid by the individual and reclaimed as an expense, with the former method probably being the more advisable.

[THEPUMA]

Sorry, I didn't mean to imply your answers were internally inconsistent, just I never seem to get the same answer from two accountants.

Anyway, pending Malvolio's further enquiries, I think it must be the case that PCG doesn't pay corporation tax on the fees and therefore members have to, as you speculate in your last paragraph. And while I agree that this doesn't imply it's not a benefit in kind, I maintain that it's most certainly not a benefit in kind anyway, and therefore can either be paid by the company or paid by the individual and reclaimed as an expense, with the former method probably being the more advisable.

I too await Malvolio's further enquiries with interest. However, I would refer you to HMRC's website http://www.hmrc.gov.uk/manuals/eimanual/EIM32900.htm.

If you accept this at face value, it is pretty clear that it is not an allowable deduction. This means that if it is paid by the employee and reclaimed, it is definitely a BIK.

The following link describes the BIK position if the employer contracts directly http://www.hmrc.gov.uk/employers/ebi...iptions-02.htm which again reverts back to list 3 so, unless I am missing something, you are stuffed either way.

If you replace the number 2 at the end of the above link with 1, 3 and 4, it gives you all of the possibilities, and each ends up being taxable if the subscription is to an organisation not on List 3.

[malvolio]

I've gone back through the source material. First, the CT position:

According to the PCG's FD (who I suspect the Puma knows), because PCG is a trade protection organisation and not a trading body, it is not liable for CT on its subscriptions. As a result its members are not then allowed to offset that money against their CT liability. This came out of discussions between the FD and his partnership, PCG's auditors, PCG's legal advisors and HMRC, so you'll forgive me not having chapter and verse to hand. If you want the HMRC reference data, it starts at

http://www.hmrc.gov.uk/manuals/bimmanual/BIM24800.htm

The whole argument is about the PCG's not for profit status and is supported by very long standing case law (1913 or thereabouts).

As regards who pays for the subs, it has always been PCG's position that the subscription passes the "wholly and entirely" condition for BIK, so although the membership is (currently) personal, it can and should be paid for by the Company and no BIK accrues. If that is wrong, perhaps you could write to the PCG and tell them so citing the approriate rules, and I'm sure they'd take notice.

[THEPUMA]

I've gone back through the source material. First, the CT position:

According to the PCG's FD (who I suspect the Puma knows), because PCG is a trade protection organisation and not a trading body, it is not liable for CT on its subscriptions. As a result its members are not then allowed to offset that money against their CT liability. This came out of discussions between the FD and his partnership, PCG's auditors, PCG's legal advisors and HMRC, so you'll forgive me not having chapter and verse to hand. If you want the HMRC reference data, it starts at

http://www.hmrc.gov.uk/manuals/bimmanual/BIM24800.htm

The whole argument is about the PCG's not for profit status and is supported by very long standing case law (1913 or thereabouts).

As regards who pays for the subs, it has always been PCG's position that the subscription passes the "wholly and entirely" condition for BIK, so although the membership is (currently) personal, it can and should be paid for by the Company and no BIK accrues. If that is wrong, perhaps you could write to the PCG and tell them so citing the approriate rules, and I'm sure they'd take notice.

So I think we've clarified the CT position. it isn't a deductible expense, unless it is a BIK.

Re the BIK issue, I'm sure that is the PCG's position. My golf club would tell me the same if it meant that I would subscribe with them (I don't have a golf club incidentally, but you take my point).

I've just cited the appropriate rules. I've no inclination to write to the PCG and tell them. It certainly doesn't fulfil the necessarily test and the HMRC website seems quite clear to me (although that in itself isn't necessarily conclusive).

[malvolio]

Well it had to happen one day.... I'm wrong

PCG subs are a BIK, exactly as my learned friend has said. (note to self - learn to read properly...)

Everyone happy now?