This guest blog comes from our accountant and resident tax expert, Michael Bennett, following an enquiry from a Private Practice Hub member about claiming expenses against tax. Michael has also provided two supporting excel templates, expenditure and income forms, which you can find in the Private Practice Hub members download section here, to help you keep track of expenses and income for your private practice
I am frequently asked the question, “What can I claim against tax?”
The legislative reply is: “Any expenditure incurred wholly and exclusively for your business.” There is further clarification insofar as if it is not incurred exclusively, can it be apportioned? I will come back to this later. The easy and obvious expenses are things like medical supplies (couch rolls, oils, tissues etc.) extending also into supports, pillows, supplements etc. Advertising, professional subscription (strictly annual fees only – not initial joining fees) CPD costs including related accommodation expenses, are all claimable.
For those of you with larger clinics, staff costs are allowable. Don’t forget you can claim up to £150 per employee in respect of a “Christmas Do” or similar. (I emphasize the word employee!)
Premises costs are also allowable; for larger clinics this normally means rent to a landlord, for smaller ones it would be contribution to principal. Also in this category comes business rates, buildings insurance and essential maintenance. If you have a building that is part business, part residential, then you need to think about apportionment. If you are fortunate enough to own the building then you can also consider mortgage interest.
Staying with apportionment, the key areas where this normally applies are telephone costs, motoring costs and use of home. If you are on a fixed monthly mobile contract and don’t exceed the included minutes, claim all of it. You will have to apportion your home phone bill. Motoring costs can be a problem. As a guide, historically you have been allowed to claim the cost of driving (or other travel) between clinics, but not from home to work. It therefore follows that if you treat a reasonable number of patients at home, home becomes a clinic and travel costs to any other clinic are allowable. You can also claim home visits, CPD travel, trips to the bank or to purchase supplies, or to see your accountant.
There is currently a test case going through the tribunal system regarding the costs of travel between clinics – watch this space.
A word of caution here; I was recently consulted by an osteopath who was having these “home clinic to other clinic” costs disallowed by the Revenue. Investigation revealed that the home clinic was a sole trade whereas the other clinic was a partnership. The Revenue correctly refused the travel costs because they were travel between different businesses.
What about overseas travel? The Revenue has tightened up on this one.
If you are going abroad to teach then no problem, although any income should also be disclosed, even if it was taxed overseas (don’t worry most countries have ‘double tax treaties’ which prevent you being hit twice on the same income). Going abroad for a conference on other CPD course is also allowable, but if you extend your trip to include a holiday, then you will need to apportion.
If you are thinking of relocating overseas then beware, the costs of “visiting to see what is there” cannot be claimed unless you are considering opening an overseas branch of your UK business.
I was recently asked about ‘uncollected fees’. A practitioner provided no charge treatments to family members and wanted to claim bad debt relief for the non-payment. My response was that in order to claim bad debt relief, they must also include the fees that they haven’t charged as additional income, which brings them to a ‘net-nil’ position.
Don’t forget to collect receipts for the small items of expense that you incur from time to time. Things such as magazines, children’s toys, flowers, possibly CDs – all have a place in the scheme of things.
A tricky area is food. The Revenue approach is to allow reasonable food costs when coupled with an overnight stay away from home (so you’re OK with the restaurant bill at the annual conference). The Institute of Taxation also suggest that if the cost of subsistence is incurred as a result of your business, then it should also be claimed. The line however must be drawn so that daily lunches are excluded when in your normal working pattern. Also please note that personal grooming and non-specialist clothing can never be claimed against tax.
As a final general guideline, look at the things you spend money on and ask yourself the question: “Could this be something wholly and exclusively (or apportionable) for work?”
Michael B Bennett