Running a healthcare business requires strong control over your finances so you can continue providing quality care to your clients.
Maintaining a tight budget can be tough, however. But, by claiming allowable expenses, you can ease your tax liability and maximise your financial efficiency by claiming allowable expenses.
But what are allowable expenses and how do they work? And what allowable expenses are there for the healthcare industry? In this blog post, we delve into these questions so you can manage your finances better.
What are allowable expenses?
An allowable expense is a cost or expenditure that a business incurs “wholly and exclusively for the purposes of [its] trade, profession or vocation”. The business can then deduct the cost from its pre-tax profit to reduce its tax liability.
In other words, for an expense to be allowable, your cost must be necessary to the function of the business and (usually) used solely for business purposes. Items like business suits generally aren’t allowable because they’re personal items, but company uniforms are (you wouldn’t wear yours outside of work, would you?).
However, there are exceptions to this rule. For instance, you might think that commuting to work is necessary for your business, but HMRC classes it as a private journey. It’s the same with regular meals, like lunches at your desk.
But if your journey is somewhere other than your regular place of business and is for business purposes, you can claim for the cost of travel. Likewise, if your meal was outside of your everyday working routine (lunch before a conference or a dinner to meet suppliers, for instance), that may class as an allowable expense.
Allowable expenses for healthcare businesses
Now that we’ve covered the basics of allowable expenses, let’s dive into some specific to the healthcare industry:
- Medical supplies and equipment. Includes medical instruments, devices, medications and other suppliers directly related to patient care.
- Professional services. Fees paid to lawyers, accountants and consultants for their services may be allowable.
- Continuing education and training. Expenditure related to an employee’s professional development usually counts as an allowable expense.
- Employee wages and benefits. Salaries, bonuses, health insurance, retirement contributions — they’re all allowable.
- Business premises. This includes business rates, rent, electricity and gas.
- Marketing expenses. Includes costs for advertising, postage and business cards.
How do I tell HMRC about my expenses?
To report your allowable expenses to HMRC, you’ll need to include them in your self-assessment or corporation tax return.
Before filing, we recommend gathering all the relevant documentation to support your claim. This includes invoices, receipts, bank statements and other records that demonstrate the purpose of your purchase.
On your return, HMRC requires businesses to categorise their expenses in specific sections, as well as additional information or explanations about certain purchases.
As you might have guessed, you need to be extremely organised to successfully claim for every expense possible; if you’re looking for a helping hand, you can always look for a professional bookkeeping service.
As you can see, the process for reporting allowable expenses isn’t exactly simple, so it’s a good idea to reach out to an accountant who can help.
Talk to us about your allowable expenses and find out how we can help.