How To Manage Your Personal Expenses For Tax Purposes
Self employed GPs can claim personal expenses which are incurred wholly and exclusively for business which can reduce their tax liability.
A percentage of all expenses relating to running a car can be claimed, these include petrol, insurance, road tax, servicing, repairs and cleaning. If your car has been purchased on hire purchase or you have a loan, then a percentage of the interest can also be claimed. The percentage claimed must reflect the business use element of the car. Traveling from home to the surgery is private use and only journeys to patients homes, hospitals and other work related places can be claimed.
Capital Allowances on cost of Motor Car
A claim can be made for the wear and tear of the vehicle, this is known as capital allowances. This is calculated based on 20% reducing value of the car or if over £12,000 then the capital allowances are restricted to £3,000p.a until the value of the car falls below £12,000.
Professional use of home
A claim can be made as the majority of GPs will do some work at home. There are various ways to claim, some accountants use a fixed amount per week, others calculate it specifically using a percentage of the running costs of your home. Many GP’s think that if they do claim, there is a capital gains implication when they sell the house. This will not be the case as long as the room is not used exclusively for work
Telephone and Computer Expenses
A claim can be made for the use of home telephone, mobile, use of a computer at home and internet costs if these are used for business purposes. Only the business use element of the costs can be claimed.
Courses and conferences (including travel and accommodation)
These can all be claimed in full, as long as, you do not tack a holiday or sightseeing onto the end of the trip.
This can still be claimed but only in certain circumstances. Firstly, your spouse must be helping you with your work and you must pay them the salary, preferably, monthly. It is recommended that you have a job description, indicating the type of work and number of hours worked a week. The pay should be realistic for the work done. It is always an area that Inspectors like to look at, so set it up correctly.
A claim can also be made for medical subscriptions, drugs and instruments, medical books, journals, postage and stationery. You can not claim for clothes that you wear to work, instead you can claim the cost of dry cleaning.
You must keep all invoices relating to any claim for tax purposes for the minimum of seven years. However, if receipts have been lost reasonable estimates can be made.
One of the simplest ways of keeping some of your records, particularly motor expenses, is to have a separate credit card. The Inland Revenue will accept the statements as evidence and this will at least mean you have a record of expenses if you lose the receipts. The credit card should be used for as many business related items as possible.
Partnership Tax Return
The partnership tax return incorporates the practice accounts and each partner’s expenses claim. It is for your own benefit to compile your expenses as quickly after the year end as possible so this does not delay the completion of the tax return. If a partnership tax return is filed after the deadline, each partner will receive a £100 penalty.
Tips for managing your expenses:
- Know what expenses you can claim for tax relief
- Keep records and receipts of all expenses claimed
- Keep a business mileage log for a typical month so that a reasonable claim can be made for motor expenses, this can also be used as evidence to support your claim
- Make reasonable claims for business use so that you are happy you can justify to an Inland Revenue inspector, if enquires made
- Complete your expenses as soon after the year end so that this does not delay completion of partnership tax return and your own tax return
- Try not to use estimated expenses as these could be less than the actual amount spent and an inspector may disallow if these are not supported by evidence.
As locums are also self employed, they will be able to claim the same expenses as GP principals, the only difference will be the business use element of expenses. As a locum has no permanent place of work, their business address is there home and therefore they will be able to claim travelling from home to the different surgeries as business travel.
Employed GPs can only claim expenses that are wholly, exclusively and necessary for them to perform their duties. Therefore it is much more difficult to claim expenses if you are employed. Expenses that can be claimed are medical subscriptions, business mileage can be claimed for home visits and this will be based on the Inland Revenue’s fixed profit car scheme rates. It is important that a business mileage record is kept. You can also claim drugs and medical instruments. For any expenses claimed you will also need to keep all receipts as evidence.