Payroll departments have two overriding responsibilities: To pay people on time and to pay people accurately. To do that, we need clear and consistent guidance.  It is absolutely paramount that we receive this to ensure that civil servants at HMRC can never accuse employers of operating PAYE variably, as was the case at the Public Accounts Committee (PAC) in September 2018 (‘the standard of administration of PAYE is not good enough’ by some employers and ‘significantly variable’ said HMRC’s Chief Executive and Permanent Secretary).

Therefore, it is surprising that the guidance issued by HMRC is not consistent, the latest issue being with that of List 3.

What is List 3?

Part 5 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA) allows for certain deductions to be made from taxable pay – i.e. to reach a figure called net taxable pay which is the pay on which Income Tax is calculated.  This part includes things such as expenses for business travel.

Sections 343 and 344 of ITEPA allow for professional membership fees and annual subscriptions to be provided free of tax and National Insurance where:

  • It is paid to a body that has HMRC approval, and
  • The activities of the body are of direct benefit to or concern the profession practiced in the performance of the duties of the employment.

The full list of professional bodies that have the necessary HMRC approval is published in a document known as ‘List 3’.  List 3 is essential reading for the reward professional, as the day-to-day professional impact of a body appearing on it are that:

  • Employers can reimburse fees and subscriptions without a P11D implication and / or
  • If the individual has paid the subscription and it has not been reimbursed, they can claim tax relief on the fee or subscription that they have paid

Therefore, knowing the professional bodies that are on List 3 is essential so that we can apply the necessary deduction from taxable pay and operate PAYE in a standard fashion.  That is why we look diligently for updates to the List.

27 March and 03 April 2019

On 27 March 2019, List 3 was updated but the text only said:

The list of professional bodies approved for tax relief have been updated with 6 additions.

On 03 April 2019, List 3 was updated again with the text:

The list of professional bodies approved for tax relief have been updated with 6 additions and 4 name changes.

So, in just over one week, List 3 had changed with 12 additions and 4 name changes.  However, professionals are unaware of what the changes actually are.  To go through all of the professional bodies on List 3 would take an age, something that I relayed to HMRC with the response ‘Thank you for your bringing this to our attention. We will review and respond’.

There has, as yet, been no response.

However – what about 04 April 2019?

On 04 April 2019, HMRC updated List 3 again, this time with a commentary of what had happened.

From the tax year 2018/19, the following were added:

  1. Faculty of Sports & Exercise Medicine UK (FSEMUK)
  2. The Irish College of General Practitioners (ICGP)
  3. Independent Doctors Federation Ltd (IDF)
  4. UK Endocrine Pathology Society (UKEPS)
  5. Data Management Association UK Ltd (DAMAUK)
  6. Rosen Institute (RI)
  7. European Sponsorship Association
  8. National Register of Public Service Interpreters (NRPSI)
  9. Business Architecture Guild Architecture
  10. UK Magnetics Society
  11. The Avon Group
  12. Basics of Scotland Ltd

Plus, the following were notified as changes:

  1. Public Relations Consultants Association Limited to Public Relations Communications Association (2016/17 onwards)
  2. Citizen Teaching, Association for (ACT) to Association for Citizen Teaching (ACT) (2016/17 on wards)
  3. Highways & Transportation Civil Engineers to The Institution of Chartered to Chartered Institution of Highways & Transportation (CIHT) (no effective date given)
  4. Enforcement Services Association (ESA) to Civil Enforcement Association (CIVEA) (no effective date given)
Update 23 April 2019

From the tax year 2018/19, the following were added:

  1. 100 Women in Finance Association
  2. Faculty of Medical Leadership and Management
  3. Water Management Association and Vocational Rehabilitation Association

The 12 additions and 4 changes detailed on 04 April 2019 may be the same 12 additions and 4 name changes that were mentioned on 27 March and 03 April which we were awaiting details of.  Or they could be another 12 and 4! Clarification and consistency from HMRC would be appreciated.

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