Contractors' Questions: How to pay dentist and optician bills as a PSC?

Contractor’s Question: Am I permitted to take out a dividend to cover the costs of treatment from a dentist and an optician? 

The dental work was on the NHS, but I no longer have private dental or medical cover since becoming a PSC contractor. Maybe I can put a pair of glasses and dental fees on expenses?

Expert’s Answer: Let's address whether to declare a dividend to cover dental and optician costs through the company, but primarily focus on whether these can be claimed as a business expense -- an often more complex area for contractors to get to grips with!

So briefly regarding dividend cover, providing the company has the available profits to declare a dividend, you can declare this dividend at any time. Be aware though -- you’ll need to consider timing of the dividend as to which tax year it falls into, any director loan account implications (keeping it below the benefit-in-kind threshold), and if there are any other shareholders too, that this will impact.

Contractors can pay for healthcare, medical checks and other welfare expenses through their limited companies. However most of these are likely to attract a benefit-in-kind charge. As always though, there are some exceptions to the rule!

Providing the invoice is issued in the company name, the cost of one medical check-up and one health screening per year can be claimed without any benefit-in-kind implications.  A company can also pay for medical treatment as an allowable expense, if you were injured while contracting.

However, this does not include any dental costs. If these were paid by your limited company, you’d have a couple of options -- the cost would be subject to benefit-in-kind implications, you could repay the funds back to the business or you could declare a ‘paper’ dividend for the cost.

Optician’s costs can be more favourable, as you can claim the cost of an eye test through your business an allowable expense (assuming you do use a computer as part of your duties).  But the next question, then, will likely be: Can I claim for lenses or glasses through my company as an expense?

If you need to wear lenses or glasses all of the time and for general use, then if these were paid through the company, they would not be ‘wholly and exclusively’ for the business, therefore benefit-in-kind implications would apply. But if you only use the glasses solely for business purposes (only for computer use for example), the cost can be claimed through your company as an allowable expense.

As you can see, when it comes to claiming expenses through your company, it’s not just as simple as ‘yes or no’, you have to sift through the grey areas!

The expert was Louisa Drewett of contractor accountancy firm Aardvark Accounting.

Monday 10th April 2017