Paying Business Expenses from Personal Funds – What are the Issues?

For an expense to be tax deductible in a Private Practice, it must have been incurred wholly and exclusively for the purpose of the medical business. A cost is generally allowable if it is deemed to contribute, wholly or at least in part, to private income generation. Allowable costs range from medical indemnity insurances to business related travel expenses.

A vital part of an accountant’s role when preparing Private Practice accounts is the bank statement analysis. This is often a very time consuming process which involves analysing each receipt and payment from the business bank statements. Using this process, each payment can be identified, analysed and appropriately treated within the accounts.

It is however, business expenses paid from other funds such as a personal bank account or cash which leave the accountant in the dark. These payments are often forgotten about by the time the books and records are sent to the accountant even though they are equally as important as the payments made from business funds. Let us not forget that for every business pound spent there is an associated tax saving, often as high as 45%.

From our experience, the most common expenses overlooked by clients relate to travel & subsistence (train tickets/course travel), telephone (particularly mobiles), postage and stationary (often paid using cash) or fixed asset additions (laptops, printers, tablets) used for business admin purposes.

In conclusion, we recommend paying business costs from the business bank account whenever possible. This way, the doctor can rest assured that all business costs will be picked up and accounted for. However, we do appreciate that this is not always possible, especially when purchasing small sundry business items. In those instances, a sensible approach would be to make a note of each payment made personally, either in your smartphone or a notepad. The note should include the amount paid, nature of the expense, the date of the payment and the supplier being paid.

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