The tax treatment of medical and health expenses

As a limited company owner, there are a number of expenses you can legitimately claim back from the business without being hit for tax. Many of these are easy to identify but one grey area is medical and health-related expenses, as some of these are considered as a benefit in kind (BIK) and deemed taxable.

For example, as an employee of the company who works with computers all day, are you entitled to claim for the cost of an annual eye test? What if you have to pay for medical care while travelling abroad on business – can you claim some or all of that back? And is it possible to offset the cost of gym membership against tax? Just what is – and isn’t – claimable?

Let’s start with some of the health and medical-related expense that you can claim back from your company:

Health-related expenses your company can claim tax relief on

Eyesight test

If you use a visual display unit (VDU) as part of your normal duties, you can claim the cost of an eye test as a legitimate expense.

Glasses

You can claim for the cost of glasses or contact lenses if you need them for VDU work. If the glasses are also for general use but includes a separate prescription for VDU use, you can claim back the cost of this part of the prescription.

Check-ups and health screening

You can claim back costs incurred for a single health-screening assessment and/or single medical check-up (see below) in any one tax year.

Medical treatment

You can claim back expenses incurred by treatment for an injury or for a condition that was caused while you were carrying out work duties.

Medical expenses while working abroad

If you’re a director or employee and are injured or need medical treatment while working outside the UK, you can claim back the cost of the treatment. It’s important to note that you can only claim back costs for your own treatment and not for any health-related costs incurred by a family member accompanying you abroad.

Health screening and check-ups

As stated above, you’re allowed to claim for a health-screening and a single medical check-up in the same tax year. HMRC defines health screenings as an assessment aimed at “identifying employees who might be at a particular risk of ill health”. The assessment could be in the form of a telephone interview or questionnaire where you are asked to answer questions about your health and lifestyle. A medical check-up is a physical examination carried out by a doctor or other health professional to determine your state of health. That means you can opt to go for an annual check-up and pay for it through the company without it being taxed as a benefit.

So, what about gym membership?

Regular workouts at the gym will definitely help to keep you healthy which is clearly also good news for the company. Unfortunately, you won’t get very far trying to claim gym or sports club membership as a legitimate business expense.

If membership fees are paid for by the company, the employer will have to pay national insurance contributions and you will have to pay tax and NICs on what HMRC considers a benefit in kind.

Private health insurance

As you benefit personally from any claims made on a private medical insurance policy, this is not something your company can claim against Corporation Tax. However, you may still decide to set up a policy via your company, as the true cost after tax may actually be less than paying personally.

Despite the additional National Insurance and income tax you will have to pay on premiums made by your company, it may be worthwhile as some policy providers offer more favourable terms to corporate clients. Find out more in our dedicated guide to PMI.

Permanent health insurance

You may decide to set up an executive PHI policy via your company. Premiums can be legitimately offset against your company’s Corporation Tax bill, and no Benefit In Kind charges apply to the employees who are covered.

However, should you be unable to work and make a claim, any payments made from the policy are paid to the limited company’s bank account. These funds will then be taxed as normal when you draw down income from your company.

You may be better off paying for PHI personally, but there are administrative benefits to having an executive policy and you can typically cover up to 80% of your income (compared to around 60% for a personal policy). You should discuss your options with a financial adviser.

For more information on health and medical expenses, see HMRC manuals EIM21765 and EIM21762.

Read our complete guide to business expenses here.