The short answer is… maybe. It depends on the specific situation. Business expenses can be a little confusing in general.
In an effort to make things a little simpler, let’s talk about business expenses.
Specifically, we’ll be answering these questions:
- What are business expenses?
- What counts as a business expense?
- Is physiotherapy a business expense?
- What is ‘duality of purpose’?
- When does ‘duality of purpose’ apply?
- When does ‘duality of purpose’ not apply?
What are business expenses?
If you’re self-employed, you have to complete a yearly self assessment tax return to HMRC. When you do, you pay taxes based on your taxable income for the year.
The amount of tax you pay depends on your yearly income, like this:
- Personal allowance – If you earn £12,570 or less, you pay 0%.
- Basic rate – If you earn between £12,571 – £50,270, you pay 20%.
- Higher rate – If you earn between £50,271 – £150,000, you pay 40%.
- Additional rate – If you earn over £150,000, you pay 45%.
Because you’re self-employed, there are some things that you can claim back as business expenses.
All it means is that you can take the money you spend on essential business expenses, and deduct it from your total taxable income, meaning a lower tax bill.
For example, if you make £40,000 for the year, but you spend £10,000 on various business expenses, then your taxable income is only £30,000.
£40,000 (total income) – £10,000 (business expenses) = £30,000 (taxable income)
With this in mind, it’s incredibly important to keep track of all your business expenses throughout the year. But first, you need to know what counts as a business expense.
What counts as a business expense?
A business expense is anything you buy that is essential to running your business. Some common examples are:
- Bank fees and interest
- Company car
- Equipment or equipment rental
- Membership fees
- Legal fees
- Maintenance and repair
If you work from home, you can also claim a lot of your home costs as business expenses.
- Home office space (as long as this is your main place of business)
- Mortgage interest
- Security system
- Property taxes
- Maintenance, repairs or upkeep
- Business phone line (separate from the home line)
If you’d like more information about what you can claim as a business expense, check out the HMRC website.
Is physiotherapy a business expense?
To qualify as a business expense, HMRC uses the ‘wholly and exclusively’ rule. This basically means that the thing you buy is only a business expense if it’s wholly and exclusively for business purposes.
For example, when you rent a forklift, you’ll probably only use that for business purposes, so HMRC will allow you to deduct the full rental amount from your taxable income.
The same is true if you hire a rental car for business uses only.
If you have a personal car that you also use for business purposes, you can deduct the amount you spend based on mileage. For example, if you use it for business half the time, you can deduct half the running cost from your taxable income.
This is where things get a little tricky, regarding physiotherapy, because it can be difficult to define when physiotherapy is ‘wholly and exclusively’ vital to the running of your business.
Medical procedures in general, including physiotherapy, are not classed as business expenses if they have a ‘duality of purpose’. This basically means they give you some personal benefit that has nothing to do with your business.
What is ‘duality of purpose’?
HMRC likes to stress that it doesn’t matter what your intentions are when you make a purchase. If you get some other personal benefit from it, it serves a dual purpose and it’s not a business expense.
For example, a labourer needs to eat lunch for energy to do their physically demanding work, so you might think the lunch could count as a business expense.
But, according to HMRC, the labourer would have eaten lunch anyway so they could stay alive, so there is a ‘duality of purpose’.
In other words, they ate their lunch because they were human, not because they were a labourer.
Some common expenses that have a duality of purpose are:
- ordinary ‘civilian’ clothing
- food for sustenance
- having somewhere to live
- wishing to enjoy good health
- wishing to avoid a criminal conviction – especially if there is a custodial sentence
- helping one’s nearest and dearest
The fourth on this list, “wishing to enjoy good health”, is usually the one that stops physiotherapy being allowed as a business expense. But it can still count if the cost of the physiotherapy passes the ‘wholly and exclusively’ rule.
Of course, it will vary depending on the situation and the kind of business you’re in. To clear things up, let’s look at some specific examples.
When does ‘duality of purpose’ apply?
Most medical procedures and services, like physiotherapy, can be difficult to qualify as business expenses, because it’s almost always the case that they have a ‘duality of purpose’ i.e. making you feel better.
For example, if you hurt your leg and can’t walk, and therefore can’t work, you might need physiotherapy to get back to work. But, being able to walk again is a benefit to your overall health, so it’s not ‘wholly and exclusively’ a business expense.
In other words, you don’t need to walk for just your work. You do it all the time, so it has a ‘duality of purpose’ and is not a business expense.
When does ‘duality of purpose’ not apply?
Talking about physiotherapy, specifically, HMRC uses examples involving athletes because their jobs require them to do things that go beyond normal human wellbeing.
The case they use as an example involved a stunt man who had hurt their knee and was unable to work. The stunt man was concerned that a slow recovery would cause him to lose out on work, so they paid privately for a knee operation, chiropractor, and masseur.
HMRC classes this as a business expense because his particular job demanded that he recover quickly, and any other personal benefit (the faster recovery) was an unavoidable effect.
In the other words, the money he spent was wholly and exclusively for the purpose of his job, so it was a business expense. He could have waited longer to heal, and get surgery through the NHS, but he had to spend money so he could get back to work faster.
The exact rules they set out are that medical expenses can be deductible when:
- It’s beyond the needs of a normal human being.
- It’s something particular to their profession.
- Personal benefits are unavoidable.
A sprinter, for example, could claim their physiotherapy expenses during a competition. This works because:
- Normal human beings don’t need to run so fast.
- Their job requires them to run fast.
- The personal benefits are unavoidable.
Most people aren’t professional athletes, true. But it’s a useful example because of the nature of the job.
The ‘wholly and exclusively’ rule can apply to physiotherapy for any worker who needs their body to do things that are beyond the needs of normal function.
A ceramics worker, for example, suffering from wrist injuries, because of the incredible strain on their wrists, could claim physiotherapy as a business expense.
This applies because:
- Normal people don’t need to use their wrists in such a way.
- They couldn’t continue their work without physiotherapy.
- The personal benefits (pain-free wrists) are unavoidable.
Remember, it’s the cost that HMRC looks at. Not the physiotherapy itself. A ceramics worker could wait for their wrists to heal naturally, restoring normal human function, but that would take much longer and interrupt their business.
The money they spent for private physiotherapy, and quicker recovery, was ‘wholly and exclusively’ for the purpose of the business.
Every case is different, so it’s difficult to say what will and won’t qualify as a business expense.
If you have an accountant, it’s definitely asking for their advice. And it’s often worth trying to make a claim even if you’re not sure. HMRC may even deduct part of the total bill, and the worst they can do is say no.
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