One of the most frequent questions asked by contractors is “what health-related expenses can I pay via my company?”
Claiming medical expenses – the basics
The simple answer is – your company can pay for as many medical-related expenses as it likes, but you will be taxed personally on the value of any ‘benefits-in-kind’ you receive.
Your company will also have to pay Employers’ National Insurance Contributions (NICs) at 13.8% on the value of these benefits.
In other words, you will only escape paying personal tax on health-related benefits if the business itself benefits from paying for the expense.
For example, a business can legitimately pay for employees’ eye tests if they use computer equipment, but if it pays for your health insurance policy, you (and your company) will have to pay extra tax.
Here we look at the tax treatment of the most commonly claimed health-related expenses.
Scroll down for HMRC manual references for further information.
Your company can pay for your personal medical insurance policy, and offset the cost against its Corporation Tax bill.
However, as you benefit personally from the provision of the policy, you will have to pay extra tax on the value of the benefit.
However, it may still be more beneficial for your company to pay for your medical insurance, as businesses often receive more comprehensive, and better value cover than individuals.
In fact, according to the Government data, over 2.2 million employees currently receive private medical and/or dental from their employers, which suggests that this is often a worthwhile perk to get taxed on.
You (or your accountant) would need to weigh up the cost of each route, taking into account the benefit-in-kind charge you have to pay on a company policy, and the extra National Insurance Contributions the company has to pay on the annual cost of the insurance policy.
Find out more in our dedicated guide: who should pay for my health insurance policy – me or my company?
To get a tailored health insurance quote from WPA, read our guide to contractor medical insurance for further information.
The cost of an eye test is an allowable business expense if you use a computer for your work. No BIK liability will arise.
Health Screening / Check-ups
You can claim the cost of one health assessment and one medical check-up per employee, without attracting a BIK charge for the employee.
HMRC defines a ‘health-screening assessment’ as one used “to identify employees who might be at a particular risk of ill-health.”
A ‘medical check-up’ is defined as “a physical examination of the employee by a health professional for (and only for) determining the employee’s state of health.”
So, if you plan to take a health assessment during the year, it is certainly worth paying for this via your company, as you will not be taxed on the benefit.
If you are injured while carrying out your work duties, then the cost of any medical treatment is an allowable expense.
If you’re working overseas, and require medical treatment, then this is also an allowable and non-taxable expense.
You can only claim for treatment received by the company director (or employee), not any relatives.
It is hard to justify the cost of gym membership as a legitimate business expense, as although your company benefits from having healthy employees, these employees would otherwise have to bear the cost personally.
So, if your company pays your gym membership bill, it will have to pay employers’ NICs on the annual cost, and you will also face a BIK charge at self-assessment time.
Permanent Health Insurance
A PHI policy will cover you in the event that you’re unable to work. The cost reflects how much income you want to receive in the event of a claim, and how much time passes between the claim being made and when payments fall due (known as the ‘deferred period’).
The costs of a PHI policy can be paid by your company, and offset against its tax bill, however should you make a claim, you will receive a BIK charge on any payments you receive.
If you pay for a PHI policy personally out of post-tax income, any payments you receive following a claim are tax-free.
Find out more information about contractor income protection cover.
Refer to the following HMRC manuals for more technical explanations of how health-related expenses are treated for tax purposes:
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