There is little scope for an employed doctor to claim tax relief on expenses. For an expense to be tax deductible it must be expended ‘wholly, exclusively and necessarily’ in the performance of the duties of employment.

• The cost associated with replacing small items of medical equipment (e.g. stethoscope) should be tax deductible, provided the employer does not provide the equipment.
• Tax relief is specifically allowed on the annual subscription or retention fee (not registration fee) to approved professional bodies (e.g. BMA,GMC etc).
• Tax relief is allowed on professional indemnity insurance (e.g. MPS, MDU etc).
• Tax relief is not available on examination fees or course fees. There is an exception where the course is a full-time one requiring the employee’s attendance on every (or virtually every) working day for four consecutive weeks or more. The course also needs to satisfy additional stringent conditions laid down in the extra-statutory concession.
• The cost of books is not usually tax deductible. In exceptional circumstances where a doctor is required to purchase substantial works of reference, the Inland Revenue may allow a deduction under the capital allowances provisions.
• Protective clothing and the cost of its cleaning may be allowable if the employer does not meet the costs.
• The purchase and cleaning of everyday clothing is not tax deductible.
• Non-reimbursed business mileage is tax deductible. Employees can make a claim based on the actual costs incurred (receipts must be kept) or by using the Authorised Mileage Rates which are set by the Inland Revenue. (Home to work travel does not count as business mileage).
  

Expenses Reimbursed

• In most circumstances, business expenses such as mileage allowances and course fees reimbursed by an employer are not taxable on the doctor.
• Reimbursed telephone rental costs are usually taxable on the doctor as the rental charge is incurred for both professional and personal purposes. Any taxable element will be reported on form P11D by the employer.
• The tax treatment of reimbursed mileage is complex and can differ depending how the reimbursement is calculated. Generally, business travel costs reimbursed are received tax free by the doctor. In certain circumstances, additional tax relief may be claimed by the doctor on business mileage costs where the amount reimbursed by their employer is less than the costs incurred. Business mileage that is reimbursed in excess of the costs incurred (therefore containing a profit element) will be taxable on the doctor and shown on form P11D provided by the employer.
• Qualifying removal expenses associated with a doctor’s relocation may be paid tax free up to a qualifying limit of £8,000. The area of relocation expenses is extremely complex and professional advice should be taken if the situation arises.

Income Tax Returns

• Employed doctors with salaried income only will not normally need to complete an income tax return unless:
  • They have been sent one by the Inland Revenue.
  • The doctor wishes to claim tax-allowable expenses e.g. subscriptions, mileage etc.
  • The doctor has received untaxed fees (e.g. cremation fees, court reports, rental income etc)
  • The doctor is a higher rate taxpayer with other income (e.g. dividends, bank
    interest etc) on which additional tax will be due.
• Regardless of whether a tax return is received there is a legal obligation on all individuals to notify the Inland Revenue of any liability to tax they have by 5 October following the tax year end (i.e. 5 October 2005 for 2004/05). Failure to notify the Inland Revenue could result in tax-based penalties.

This information sheet is designed to be a general guide only and no liability is accepted by Taxation Solutions Limited for any loss occasioned in reliance on the information given therein.