Can Psychotherapy a deductible? (self-employed sole trader).

[peps1]

Wondering if I could get some advice or pointed in the right direction over this question.

I guess I should just explain my situation. I run a small mailorder business as a sole trader and suffer from a litany of issues due to complex post-traumatic stress disorder.

Starting the business was in large part a form of graded exposure to compliment ongoing CBT, rather than a money-making exercise, to the point I have to limit potential trade to maintain a manageable state for my mental health.

The fact of the matter is I would be unable to do the work without ongoing therapy. My therapist mentioned that some of their clients deducted their sessions, but that always struck me as a little sketchy, though I may as well ask here.

If any other information would be helpful, please just ask,

 

[DWS]

I vote no, cannot see how it would be ‘wholly and exclusively’ for the purpose of trade.

 

[MyAccountantOnline]

Wondering if I could get some advice or pointed in the right direction over this question.

I guess I should just explain my situation. I run a small mailorder business as a sole trader and suffer from a litany of issues due to complex post-traumatic stress disorder.

Starting the business was in large part a form of graded exposure to compliment ongoing CBT, rather than a money-making exercise, to the point I have to limit potential trade to maintain a manageable state for my mental health.

The fact of the matter is I would be unable to do the work without ongoing therapy. My therapist mentioned that some of their clients deducted their sessions, but that always struck me as a little sketchy, though I may as well ask here.

If any other information would be helpful, please just ask,

I'm really sorry to hear that but as a sole trader you can only claim costs for tax purposes that are both wholly and exclusively for the purposes of your trade (those terms are used in legislation) and unfortunately the therapy costs wouldnt fall into those categories.

 

[Argentum Tax]

The fact of the matter is I would be unable to do the work without ongoing therapy.

Unfortunately this does not make the cost of your therapy tax deductible. As Nicola (MyAccountantOnline) says, the tax legislation is very clear and any costs must be ‘wholly and exclusively’ for your trade purposes. Your therapy is not only for your work purposes; it is for your personal health and well-being too notwithstanding that you would be unable to do the work without it. Tax case law does give a very narrow meaning to those words ‘wholly and exclusively’.

Wishing you every success in your business.

 

[The Byre]

What a load of nonsense!

Of course it's tax-deductible! It's a health expense and as such, as the OP is a sole trader, it is to be taken off his or her earnings.

As always, speak to your accountant!

 

[Bobbo]

What a load of nonsense!

Of course it's tax-deductible! It's a health expense and as such, as the OP is a sole trader, it is to be taken off his or her earnings.

As always, speak to your accountant!

this is a joke, right?

 

[The Byre]

this is a joke, right?

I stand corrected - the UK is probably the only place on Planet Earth where medical expenses are not tax-deductible. (Which in my opinion, makes it less than a civilised country.)

 

[Argentum Tax]

I stand corrected

That’s ok The Byre; no need to apologise for your little outburst… oh, you didn’t! ?

 

[Gecko001]

Some types of therapy actually require the therapist to have regular therapy themselves so that they do not get affected by their clients behaviour during sessions. Those are tax deductable for self-employed therapists because there is no personal benefit and are wholly for work purposes.

 

[Argentum Tax]

Some types of therapy actually require the therapist to have regular therapy themselves so that they do not get affected by their clients behaviour during sessions. Those are tax deductable for self-employed therapists because there is no personal benefit and are wholly for work purposes.

Interesting, thanks Gecko001.

Do you have any source for this information please, that I can read? Case law, HMRC Manuals etc?

 

[IanSuth]

Some types of therapy actually require the therapist to have regular therapy themselves so that they do not get affected by their clients behaviour during sessions. Those are tax deductable for self-employed therapists because there is no personal benefit and are wholly for work purposes.

I had an ex colleague who became a hypnotherapist and mentioned that - i always assumed it was a kind of pyramid scheme as she had the therapy for herself with the person who had trained her and at a higher hourly rate

 

[UK Contractor Accountant]

This is an extract from a Therapists website : no case law, HMRC guidance to back it up though!

How can psychotherapy ever be a business expense?
The answer to this is yes, often it can. For example, any counsellor, psychotherapist or clinical psychologist can legitimately claim their own personal therapy as a business expense. Not only is this appropriate as an expense, but it is arguable that all mental health clinicians should be in their own ongoing personal therapy for self-development and to ensure that they are being appropriately supported in the emotional work they do with their clients.

However, in my own practice I have many clients who claim their personal psychotherapy as a business expense and who work in completely unrelated fields ranging from property development through to creative endeavours such as musicians

 

[UK Contractor Accountant]

Example given to Justify tax claim:

Counselling, psychotherapy and clinical psychology all fall under the heading of ‘talk therapy’. They are concerned in similar ways with helping people to work through loss and trauma. However, both the concept of ‘talk therapy’ and the idea of ‘working through loss and trauma’ cover an enormously large remit and in many instances, this remit impacts upon our ability to work. Let’s consider an example:

Sarah, a freelance musician, has recently been offered a position playing with a major orchestra. This has come about as a result of many years of hard work and dedication; it offers the potential of being the pinnacle of her career. However, to her utter astonishment she notices that every time she joins the new orchestra for rehearsals, she experiences sleepless nights and strong symptoms of anxiety that impact on her ability to play to the best of her ability. Clearly, in this example, Sarah would both benefit from psychotherapy and it can be legitimately argued that psychotherapy for her performance anxiety is a legitimate business expense.

 

[Gecko001]

Interesting, thanks Gecko001.

Do you have any source for this information please, that I can read? Case law, HMRC Manuals etc?

Here is one:

Can therapy or counselling be a business expense? - Brighton and Hove Psychotherapy

A question that is often asked of us whether or not psychotherapy, and indeed counselling or clinical psychology, can ever be claimed as a legitimate business expense? What are business expenses? I shall start this peace with a caveat – I am not an accountant and the information I am sharing has...

www.brightonandhovepsychotherapy.com

 

[Argentum Tax]

Many thanks both UK Contractor Accountant and Gecko001 for the interesting articles!

 

[The Byre]

Can someone please explain why the UK is the only jurisdiction I can think of where legitimate and much-needed medical expenses are not automatically tax-deductible?

 

[UK Contractor Accountant]

We have a stunt man as a client and HMRC have always allowed his medical expenses - they challenged them once but accepted the tax deduction in the end.

 

[The Byre]

Yes, but the very fact that they are medical expenses makes them tax-deductible in every other jurisdiction I have ever had to deal with. Germany, France, the US, Ireland, you name the country and medical expenses other than cosmetic are tax-deducible. Any other view of the matter would be contrary to any kind of moral ethic or human decency.

One cannot argue that the NHS is able to provide basic medical insurance - six million people waiting for fundamental treatment is witness to that. If you are dying of cancer or you just have a broken arm, waiting for hours, days, weeks or years is really not an option.

I have the luxury of being able to go to Germany for treatment, but what about people who are stuck here?

 

[japancool]

If I have to travel abroad for business, and pay for dialysis, I would damn well hope it would be tax-deductible, since I require it to stay alive, and without it, I would not be able to take that business trip. In the UK, I receive it from the NHS.

 

[DWS]

So why in your opinion should medical expenses be tax deductible?

 

[The Byre]

Because if you fail to get medical attention, you may die.

 

[DWS]

Because if you fail to get medical attention, you may die.

So how is that a totally business expense?
Do you not think it may have a personal element as well? Or do you only live for your business?

 

[Argentum Tax]

Because if you fail to get medical attention, you may die.

And what UK tax legislation makes the cost of the medical attention tax deductible even in those extreme circumstances?

 

[The Byre]

So how is that a totally business expense?
Do you not think it may have a personal element as well? Or do you only live for your business?

I follow your logic - but EVERY other country I have ever been in or worked in from all over Europe to Israel, Singapore, Hongkong, wherever, classes medical expenses and medical insurance as tax-deductible.
They take the view that whether one falls ill or not is hardly a matter of personal choice!

And what UK tax legislation makes the cost of the medical attention tax deductible even in those extreme circumstances?

I pay good money to have questions like that answered by people I have never met and are only seen by our Mrs. M and my wife - and they have yet to meet the new crew, ever since Brian retired.

 

[eteb3]

The fact of the matter is I would be unable to do the work without ongoing therapy.

As your PTSD is clearly a disability (within the meaning of equality legislation), in your position I'd get in touch with a disability rights org. If it is deductible, sounds like you're going to have to argue hard for it, but they exist to do just that, and may even bring a test case if there's no case law - which they'll know.

All the best with the recovery. The mind is an amazing thing.

 

[eteb3]

PS @ all the accountants: if this were an employer-employee situation, and the employer was providing therapy as a reasonable adjustment, that would be tax-deductible by the employer, I presume?

 

[Scalloway]

Expenses and benefits: counselling for employees

As an employer, you do not have any tax, National Insurance or reporting obligations if you provide welfare counselling services for your employees.

The counselling service must be:

for welfare issues, such as bereavement, ill health or stress, problems at work, sexual abuse or personal relationship difficulties
available to all your employees

The counselling service cannot offer:

tax advice
legal advice
financial advice on any matter other than debt problems
advice relating to leisure or recreation
medical treatment (other than counselling services such as Cognitive Behavioural Therapy or interpersonal therapy)

Expenses and benefits: counselling for employees

Tax and reporting rules for employers providing counselling services for employees

www.gov.uk

 

[Deleted member 59730]

A few General Elections ago it leaked out that NHS waiting lists did not affect civil servants because their employer, us, paid for private treatment.

 

[japancool]

Seems to me mental health has priority and tax benefits over physical health, and that's feels wrong.

 

[paulears]

I was thinking of things like injuries or other disabilities that would prevent or make employment/self-employment difficult and I found this. Would this be appropriate to somebody with a genuine bad back, for example? It does seem to cover those odd office chairs, but would this also extend to treatment? That's a service. If your job means lots of heavy lifting, and you have a bad back, this looks like the cost of physio/chiro treatment could be claimed?

EIM21846 - Particular benefits: exemption for equipment or services provided to employees with a disability​

Section 316 and Section 210 ITEPA 2003 and S.I.2002 No.1596​

The provision of equipment and services solely to carry out the duties of the employment, where private use is not significant, is exempt from a tax charge under Section 316 ITEPA 2003 (see EIM21610). For employees with a disability, special rules in Regulations (S.I.2002 No.1596) laid under powers in Section 210 ITEPA encourage employers to provide equipment and services to assist them to work. Normally if an employee also used the equipment or services for significant private use this would represent a taxable benefit but these Regulations ensure that no tax charge arises on this benefit when provided to an employee with a disability, even if the employee uses the equipment both in work and outside work (for example, a wheelchair or a hearing aid), and private use is significant.

 

[Cloud Accounting]

The short answer is no, but would be an interesting test case like in the stuntman example above, where injury & the need to recover from, was an accepted part of the job. There's clearly a private benefit to recovery, but injury/recovery is inextricably linked to that role..

Or where lets say basic treatment would be sufficient to resume day to day life, but the specific demands of the job required specialist treatment.

 

[eteb3]

The more relevant bits of the "special rules in Regulations (S.I.2002 No.1596)" look like being

• Condition 2
  The main purpose of providing the benefit is to enable the employee to perform the duties of his employment.
• Condition 3
  The benefit consists in the provision of a hearing aid or other equipment, services or facilities

To save you looking, section 155ZA, referred to in the S.I., has been repealed.

PTSD counselling would definitely be "other ... services". Is the counselling "to enable the employee to perform the duties"? OP says so. "Mainly" so? That looks trickier, but definitely looks worth asking a friendly lawyer to make the case if it came to it.

Does it make any difference that OP is self-employed?

 

[DWS]

The more relevant bits of the "special rules in Regulations (S.I.2002 No.1596)" look like being

To save you looking, section 155ZA, referred to in the S.I., has been repealed.

PTSD counselling would definitely be "other ... services". Is the counselling "to enable the employee to perform the duties"? OP says so. "Mainly" so? That looks trickier, but definitely looks worth asking a friendly lawyer to make the case if it came to it.

Does it make any difference that OP is self-employed?

Afraid so, different rules for employees

 

[Cloud Accounting]

In fact, there must be exceptions & lots of them. What about professional sports men/women, is physio considered a taxable benefit? Does the employer have to keep track of how any times they receive treatment & how do they assess the benefit if provided by the in-house medical team? Clearly this is essential for them to carry out there job, but it wouldn't pass the wholly, exclusively & necessarily test any more than treatment that allowed me to get back to work.

 

[Argentum Tax]

Does it make any difference that OP is self-employed?

Yes, I am afraid it does.

The SI reference that @eteb3 gave refers to formal regulations, within legislation, that relate to ‘benefits-in-kind’. Benefits-in-kind only relate to employees, not to income from self employment.

As @DWS said, there are significantly different rules in many respects for the self employed and for employees.

 

[japancool]

How about life-saving or life-sustaining treatment? If the criteria is that the employee needs the treatment in order to be able to carry out their duties, then obviously, they need to be alive to do so.

 

[Argentum Tax]

How about life-saving or life-sustaining treatment? If the criteria is that the employee needs the treatment in order to be able to carry out their duties, then obviously, they need to be alive to do so.

The employee also obviously needs life-sustaining food for example, in any case, in order to be able to carry out their duties. That doesn’t make the cost of the food tax deductible. Being alive is a prerequisite to being able to work or function at all.

 

[eteb3]

As @DWS said, there are significantly different rules in many respects for the self employed and for employees.

Is it any help if the OP incorporates and has his company employ him?

 

[Argentum Tax]

Is it any help if the OP incorporates and has his company employ him?

I would doubt it.

But then, I don’t know the numbers involved and the detailed facts. Any arguments with HMRC would be based upon the actual facts. Someone would need to make a judgement upon whether it would be worthwhile taking up the argument and the chances of winning both that argument and any resultant appeal. Then a judgement would need to be made on whether incorporation would be feasible and worthwhile in light of the facts.

The OP would need some pretty costly advice before making a decision whether to incorporate!

 

[Cloud Accounting]

I notice this on gov.uk website.​

HS207 Non taxable payments or benefits for employees (2019)​

Medical treatment to help you return to work​

Medical treatment funded by your employer to help you return to work up to a maximum cost of £500 in the tax year, provided that:

• before the recommendation for medical treatment has been made you’ve been either:
  • assessed by a healthcare professional (as part of occupational health services or by Fit for Work) as unfit for work, or expected to be unfit for work, due to injury or ill health for at least 28 consecutive days
  • absent from work due to injury or ill health for at least 28 consecutive days
• you’ve been provided with a written recommendation specifying the treatment to be provided

‘Health care professional’ means a registered medical practitioner, nurse, occupational therapist, physiotherapist or psychologist.