As a limited company owner, you will encounter a myriad of different rules governing business expenses.
Some expense rules are clear-cut, whereas others are more complex – and confusing.
Many permanent employees have access to gym facilities and often benefit from health or private medical insurance as part of their employment package.
When you make the transition from permanent to contract, you may well wonder if you can take out health-related products via your limited company.
Unfortunately, the golden rule is that you can only claim for expenses that have been incurred wholly and exclusively for business purposes. Even though your company can pay for these expenses, you – and your company – will be taxed for the privilege.
Benefit in Kind liabilities
Derek Kelly from ClearSky Accounting explains:
Health insurance and gym memberships can both be paid directly by the company and the full costs are deductible when arriving at the taxable profits for the year.
However, a benefit in kind will arise for the employee/director based upon the amount paid by the company and tax will be payable at either 20%, 40%, or even 45% dependent on the individual’s other income.
In addition, the company incurs a Class 1A National Insurance charge equivalent to 13.8% on the amount paid for the insurance or membership.
So, your limited company can pay for the costs of health insurance, but you will incur a personal tax charge for the benefit.
Exceptions to the rules
There are a few exemptions to this rule. Some expenses do not incur a benefit in kind charge, including:
- eye tests.
- annual health checks for directors and employees (such as BUPA health assessments).
- glasses (for VDU work) – when the glasses are purely for business use. Or you can claim a proportion of the costs of glasses if they have a VDU prescription.
- overseas medical treatment.
If you pay for both UK and overseas medical treatment via your company, only the overseas part is exempt from benefit-in-kind charges.
As ever, you should check with your accountant if you have any expense-related questions.
For the official line on claiming health-related expenses via your limited company, consult HMRC manuals EIM21765 and EIM21762.
Pay for health insurance personally or via your company?
You may still be better off overall by paying for medical insurance via your own limited company than out of your post-tax personal income.
Ask your accountant to compare the overall financial cost, as it depends on your own situation; if you’re a higher or additional taxpayer, for example.
Also, some insurance providers offer more attractive rates to business clients – the difference can be significant.
Find out more about health insurance
Our partner IFA, Broadbench, can create a no-obligation health insurance quote for you, and answer any questions you have.
Simply fill in this form, and the team will get right back to you during normal office hours.
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