Medical and health expenses for limited company directors

As a limited company owner, there are several 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.

Some of these are considered to be benefits in kind (BIK) by HMRC and are subject to extra tax.

Here are some typical questions company directors ask about medical and health-related expenses:

• As an employee who works with computers all day, can you claim 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 expenses 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, provided the test is required under the Display Screen Equipment rules and the relevant conditions are met.

Glasses

You can claim for the cost of glasses or contact lenses if you need them specifically for VDU work. If the glasses are also for general use but include 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. These services are offered by companies such as BUPA, HCA, Nuffield Health and AXA.

Medical treatment

You can claim back expenses incurred for treatment for an injury or condition resulting from your work where the relevant tax exemption applies. Other company-paid medical treatment will generally be a taxable benefit unless it falls within a specific exemption.

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 where the conditions for the overseas medical treatment exemption are met.

It’s important to note that you can only claim back costs for your own treatment. You can’t claim for any health-related costs incurred by a family member accompanying you abroad under this exemption.

Health screening and check-ups

If you’re a company director, you can 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, provided the conditions for the exemption are met.

So, what about gym membership?

Regular workouts at the gym will help to keep you healthy which is also good news for the company.

Unfortunately, you won’t get very far trying to claim gym or sports club membership as a tax-free business expense.

If membership fees are paid for by the company, the employer will normally have to pay Class 1A National Insurance at 15% on the value of the benefit. The employee will have to pay income tax on what HMRC considers a benefit in kind.

Despite this, it is still worth comparing the cost of gym membership if you pay via the company vs. personally. Some gyms offer corporate membership which may be more competitive than individual membership.

Private health insurance

If your company pays for private medical insurance for a director or employee, the premiums can generally be deducted as a staff cost for Corporation Tax purposes.

However, company-paid private medical insurance is normally a taxable benefit in kind. The director or employee pays income tax on the value of the benefit, and the company normally pays Class 1A National Insurance at 15%.

You may still decide to set up a policy via your company, as the true cost after Corporation Tax relief and the BIK tax charges may compare favourably with paying personally.

Some policy providers offer more favourable terms to corporate clients. Find out more in our dedicated guide to PMI.

Income Protection Insurance

You may decide to set up an income protection policy via your company, aka executive permanent health insurance.

Premiums can be legitimately offset against your company’s Corporation Tax bill, provided the normal conditions for deductibility are met.

No Benefit In Kind charges normally apply to the employees who are covered where the company owns the policy and the benefits are payable to the company.

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 income protection personally, but there are administrative benefits to having an executive policy.

You can typically cover up to 80% of your income (compared to around 60% for a personal policy), although the amount of cover available depends on the insurer and policy.

Find out more in our guide to income protection.

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

Read our complete guide to business expenses here.