One of the most frequent questions contractors ask is, “What health-related expenses can I pay through 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 benefits from paying the expense.
For example, a business can legitimately pay for employees’ eye tests if they use computer equipment. Still, 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.
Medical Insurance
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 (and the company) 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 data from the Association of British Insurers, over 4.4 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) need to weigh up the cost of each route, considering the benefit-in-kind charge you have to incur 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?
For more information on getting a tailored health insurance quote from Broadbench, read our guide to contractor medical insurance.
Eye Tests
The cost of an eye test is an allowable business expense if you use a computer for your work. No BIK liability will arise.
You may be able to claim for the cost of corrective glasses if they are used solely for business VDU use.
See this guide – eye tests and corrective glasses – what is tax-deductible?
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 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, paying for this via your company is certainly worth it, as you will not be taxed on the benefit.
Medical Treatment
If you are injured while performing your work duties, the cost of any medical treatment is an allowable expense.
If you’re working overseas and require medical treatment, this is also an allowable and non-taxable expense.
You can only claim for treatment the company director (or employee) received, not any relatives.
Gym Membership
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.
Income Protection Insurance
An income protection policy will cover you if you’re unable to work.
The cost reflects the income you want to receive in the event of a claim and the time between the claim being made and when payments fall due (known as the ‘deferred period’).
Your company can pay the costs of this type of policy and offset them 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 an income protection 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.
Further Information
Refer to the following HMRC manuals for more technical explanations of how health-related expenses are treated for tax purposes:
EIM21765 – Health-screening, Medical check-ups, eye-tests.
EIM21762 – Medical insurance, medical treatment.
EIM21766 – Medical treatment while working overseas.
EIM06410 – Permanent Health Insurance.
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