Looking after the health of your employees (and yourself) will always be high on your priority list if you run a limited company. You may incur some annual health-related costs as a business, or as an individual.
Here, contracting industry veteran, James Leckie, looks at the typical health and medical expenses you may encounter as a company owner, and which ones you can legitimately offset against your company’s Corporation Tax bill.
James runs a number of industry news sites, including IT Contracting and Limited Company Help.
Health expenses – some basics
Before we start, there are several fundamental points on expense claims.
- Any health-related costs must be directly related to the running of your business for them to be tax-deductible. Where there is ‘dual purpose’ (i.e. a joint personal and business benefit), such costs are unlikely to be eligible for tax relief.
- If your company pays for any personal health-related benefits for its directors or employees, they will be treated as ‘benefits in kind’, and subject to income tax, employees’ NICs, and employers’ NICs.
- There may be times where it is still worth paying for certain medical-related expenses via the company, even if they aren’t tax deductible. We will discuss this later in the article.
Health expenses which are usually tax-deductible
In general, these expenses can be legitimately offset against your company’s Corporation Tax bill:
Health screening / annual health checks
You can claim for the cost of an annual health check up for directors and employees – such as those provided by BUPA.
According to S320A ITEPA 2003, if you or your employees use screens (‘visual display units’) as part of their work, then the costs of eye tests are legitimate expenses.
You can reclaim the cost of ‘corrective glasses’, if they are required for work purposes. However, this is one of those ‘dual purpose’ cases, where unless the glasses will be used only for business purposes, they may not be tax deductible because you’re also using them outside work. The rules are complex, as outlined here.
Cost of medical treatment
If you or an employee was injured at work, or developed a medical condition in the workplace, then the costs of treatment would usually be tax deductible.
You can also claim for the cost of medical treatment abroad, if you have been travelling for business reasons.
Health-related expenses which are usually non tax-deductible
As you can see, the list of allowable expenses is fairly narrow. Here are some more common expenses that you typically would not be able to claim against your Corporation Tax bill:
Gym / Health club memberships
There are very clear benefits to corporate gym memberships, however, these costs are not tax deductible, as the benefit is clearly for the individual, even though their employers will also benefit indirectly from having healthy employees.
Private health insurance
Again, there are benefits to both company owners and their employees from having medical insurance in place, but this is not a tax-deductible expense.
You might still benefit from paying for some health benefits via your company
Despite the tax implications for both the company (not corporate tax deductible) and individuals (benefits in kind), you may still prefer to pay for some health costs via your company.
For example, many health insurance providers (such as WPA) have corporate policies which are more generous than personal ones. You may find that once the discount is taken into account, your company may even be better off from a tax perspective by paying for the premiums via the company.
The same is true for health memberships. Most of the larger gyms actively promote corporate membership – even for small companies.
In these situations, we suggest you talk to your accountant, as the comparable benefits of paying for something personally vs. via the company depend on a number of factors, including which personal tax band you sit within – basic or higher rate.