Medical Costs - Our Three Favourite Tax Tips!
We continue our series on the allowability for tax purposes for minor categories of expenses. This post we focus on medical costs.
As with training or clothing, these expenses from a tax point of view have an intrinsic personal element that must be considered either for proprietors of unincorporated businesses (i.e. sole traders) or for directors and employees of limited companies.
For sole traders medical costs or medical bills will not normally be deductible for tax.
For directors and employees of a company, these medical costs or medical insurance may give rise to a benefit in kind that has to be dealt with This is unless you can show the treatment or insurance related to injuries or diseases results directly from your employee’s work.
What are the tax tips to consider when incurring medical costs in your business?
Medical Costs - Our Three Favourite Tax Tips to staying healthy and productive!
Medical Costs Tip 1 - Playing Sports
If you are a sports person, then there are specific provisions that allow tax deductions for employed or self-employed sports persons who received medical treatment after injury that allows them to continue playing.
Similarly even for self-employed business people such as musicians, there is specific case law allowing for medical costs to deductible if it would not have been incurred but for their chosen profession.
If in doubt talk to your accountant as to whether particular medical costs would be tax deductible for your industry or profession.
Medical Costs Tip 2 - Exempt Costs
These (as appropriate) cover both sole traders or employees / directors of limited companies but currently, You don’t have to report anything to HMRC or pay tax and National Insurance on certain health benefits. These are:
- Medical or dental treatment and insurance if you arrange and pay the provider directly for treatment or insurance, and your employee earns less than £8,500 a year.
- Periodic medical checks or health screening (but only once a year is exempt).
- Eye tests - These are exempt if they are required by health and safety legislation for employees who use a computer monitor or other screen.
- Glasses or contact lenses - These are exempt if you have to provide them for monitor or screen work.
- Medical treatment to help an employee return to work is exempt if you pay up to £500 for costs per employee (the employee must have been absent for at least 28 consecutive days)
Medical Costs Tip 3 - Overseas medical treatment
Where director or employees need to travel overseas for work, and they require medical treatment or are provided medical insurance then these medical costs are tax deductible, and specific exemptions apply to ensure no benefit-in-kind arises.
The logic for these exemptions is that travel away from home on business has created the expense, so any medical costs are essentially travel costs (although there may be a personal benefit in the nature of the expense).
The same principle should apply to proprietors of sole traders, though no case law or guidance notes from the taxman currently exist that deal with this point.
Our Medical Costs Call To Action
Medical costs are sometimes incurred by business owners, director or employees through the normal course of business activity.
Some medical costs such as eye or health checks are good business practices to avoid further burden on the economy through ill health.
These medical costs can normally be allowable for tax purposes if they are incurred wholly in the course of business, and not spending the money means the business could not continue.
Spending money on over-the-counter medicines for a cold is not something that is allowable, but if someone needs surgery to continue working in their chosen profession, then it should normally be tax deductible.
As ever, if in doubt ask your accountant for their advice on whether particular medical costs are allowable or not. As the government looks for ways of preventing ill health and the burden on the economy, then look out for further allowances in this cost category in future years.
If you know of any other great tax tips relating to medical costs that can be shared with our readers then let us know via the comments or through LinkedIn.
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