Michael Lansdell breaks down the various rules and exemptions when making a claim.
Imagine the scenario: you need an operation on your back, and have decided to have it done privately. Until you’ve had the surgery, you will be unable to work. Can you claim a tax deduction for the cost of your treatment?
HMRC will likely tell you that, as this is a personal expense, there is no entitlement to tax relief. But you might argue that, until your back is fixed, doing your job is impossible. In fact, this is part of your reasoning for going private; it will allow you to have the operation sooner, allowing you to return to work more quickly.
The issue is that tax deductions are not allowed for any expense that has dual purpose and your back operation will have a personal advantage. HMRC’s rules state that all business expenses must be ‘wholly and exclusively’ for the purpose of the business in order to qualify for tax relief.
In rare cases, HMRC will accept that the cost of a medical treatment is tax deductible, when such an expense is intended for business purposes, with an ‘incidental’ personal advantage. Think of someone like a professional footballer or dancer, who could live a normal life outside of work if they didn’t have a certain treatment, but wouldn’t be able to carry on in their job.
However, if you are a director, or employee – so not self-employed, or a business partner – there is another condition that must be met to satisfy HMRC. This is that the expenses must have been incurred in the performance of the job.
Employer paying for treatment?
The above trap does not affect tax relief for an employer paying for treatment; if they are paying for medical treatment for an employee or director, they are always entitled to a tax deduction. It will likely count as a benefit in kind of the employee/director, though.
As ever, there are exceptions to this rule. These include an employee having counselling, so they can return to work quicker. Also, an employer paying for any type of medical treatment if it was required because of illness/injury caused by them doing their job, or incurred as a consequence of doing their job. In such cases, employers can pay for it without the employee/director being taxed on a benefit in kind.
If you are unsure, seek the advice of experts in tax planning, such as the team at Figurit. If you’re planning on paying for any kind of private medical treatment, or your employer is, we will help you optimise your tax efficiency without falling foul of HMRC’s rules.
For help with business or personal tax planning, call Figurit (formerly known as Lansdell & Rose) on 020 7376 933.