Our subscriber’s firm is in the north of England but he frequently visits London for business meetings. He’s joined a London club for a hefty fee as it offers convenient meetings rooms and a place to stay. Is the club membership tax allowable?

Tax and travel expenses

The tax rules for business travel costs can be tricky in places. The legislation isn’t precise, HMRC’s interpretation is occasionally unreasonable or out of date and most of the leading legal precedents date back to before the rules were modified in 1998. However, in a plain situation, say, an employee travelling to see one of their employer’s customers, there’s rarely an argument – the costs qualify for tax relief. But the tax position becomes sketchy when an expense is one which traditionally HMRC has refused relief for, such as membership fees for a private club.

What counts as travel expenses?

In our subscriber’s case the expense might not appear to be for “business travel”; however for tax purposes it is. While the legislation doesn’t mention accommodation etc. costs, it’s universally accepted that it applies to any expense directly linked to a business journey. This is important because the travel expenses rules are less restrictive than the general rules for business expenses.

Tip. The infamous condition that job expenses must be “wholly and exclusively” for a business purpose to qualify for tax relief doesn’t apply to travel expenses. HMRC’s internal instructions make this clear (see The next step ).

Circumstances for tax relief

Travel expenses incurred by a director or employee qualify for tax relief if either:

the director or employee’s job involves travelling, e.g. as a company rep, and it’s necessary to incur the expense in the course of doing that job; or

it’s necessary for them to travel to a place to carry out their job there, and they are obliged to incur and pay for the cost of the travel. For example, a decorator who is sent by their firm to paint a customer’s premises.

Club membership

To determine if the club membership fees paid by our subscriber qualify for tax relief you need to consider the purpose of the membership. As long as it fits one of the circumstances described above he is entitled to tax relief even he obtains some personal benefit from the membership – remember, the wholly and exclusively rule doesn’t apply.

Tip. If HMRC disputes his claim there are two legal precedents which he can refer to. The first case involves a director in a similar position to our subscriber, i.e. living away from London but often visiting for business. The court ruled tax relief was due. The second, where tax relief was denied (HMRC usually quotes this decision when disputing tax relief for business travel costs which have a personal aspect), is helpful because it highlights the difference between an expense for personal reasons that also benefits the business and an expense incurred for business which also has personal benefits.

In our view our subscriber is fully entitled to tax relief as it’s clear that his purpose for joining the club was to facilitate business meetings in London and any personal benefit is incidental.

The tax rules for travel expenses, including those for related accommodation etc., apply. these don’t require that an expense is wholly and exclusively for business purposes, only that the purpose for incurring the expense was business. Any incidental personal benefit is irrelevant. Tax relief is therefore allowable.

The Next Step

HMRC’s Guidance