You need an operation on your back. You’ve elected to go private because it means it will be done within a few weeks. Because your job is physical you can’t work until you’ve had the surgery. Does this mean you can claim a tax deduction for the cost?
Vital for the job
Our subscriber suffers from a back problem. The trouble is his has become so bad that working is almost impossible. So that he can get back to work he wants to have the surgery done privately. This will cost him almost £11,000. HMRC’s helpline told him that because it’s a personal expense he isn’t entitled to tax relief. However, he feels that’s unfair as he can’t work properly without the operation.
Business and personal
Even where medical treatment is motivated or even vital for work, it usually results in some personal advantage for you. Tax deductions aren’t allowed for expenses which have a dual purpose, i.e. a business and a personal one. The rules require expenses to be “wholly and exclusively” for the purpose of the business to qualify for tax relief. In disputes the courts have consistently come down on HMRC’s side where duality of purpose is involved. However, that’s not the end of the story.
Special jobs
The courts also accept that the duality rules don’t apply where an expense is intended for business purposes only, but has an incidental personal advantage. Because of this in rare cases HMRC accepts that the cost of medical treatment is tax deductible. Typically these involve performers such as dancers or footballers where they might be able to carry on a normal personal life without the medical treatment but they need it if they are to continue in their profession.
Trap. The position described above only applies to the self-employed or business partners. Directors or employees can never be entitled to tax relief where they pay for the cost of treatment, even where they are in one of the special occupations mentioned. This is because employee/director expenses must meet another condition: they must be incurred in the performance of the job.
Employer-paid-for treatment
The trap above doesn’t affect tax relief for employers paying for treatment. Employers are always entitled to a tax deduction when they pay for medical treatment for one of their employees or directors. The trouble is that this will usually count as a taxable benefit in kind for the employee or director concerned.
Tip. There are a few situations where legislation directly exempts employer-paid-for medical treatment from the benefit in kind rules. For example, where an employee falls ill while working abroad or it’s for counselling to speed up a return to work.
Other exempt situations
Employers can also pay for any type of medical treatment for an employee or director without them being taxed on a benefit in kind if the need for the treatment results from injury or illness caused by or as a consequence of doing their job. For example, physiotherapy for a pulled muscle caused by lifting.
This article has been reproduced by kind permission of Indicator – FL Memo Ltd. For details of their tax-saving products please visit www.indicator-flm.co.uk or call 01233 653500.