»Ê¹ÚÌåÓýapp

By contrast with permanent health insurance policies (see BIM45560), the premiums on certain sickness insurance policies are allowable deductions. »Ê¹ÚÌåÓýappse insurance policies indemnify the policyholder against business costs such as payments to a locum to temporarily carry out the policyholder’s professional activities, or other fixed overheads, in the event of the policyholder’s incapacity to carry on the business during a period of illness. Policies of this type are held mainly by medical professionals such as doctors and dentists who practise alone or in partnership.

»Ê¹ÚÌåÓýapp costs of employing a locum or of the fixed overheads of the practice are allowable under the ordinary trading income rules.

Insurance recoveries

»Ê¹ÚÌåÓýapp benefits received under the policies are trading receipts because they diminish allowable business expenses (see Donald Fisher (Ealing) Ltd v Spencer [1989] 63 TC 168). »Ê¹ÚÌåÓýappy are not within the exemption in S735 Income Tax (Trading and Other Income) Act 2005 (see BIM45560).

Personal purpose

If a policy includes insurance against the cost of personal expenses such as medical treatment and the premiums are paid partly for a personal purpose, apportionment may be necessary so as to allow only the proportion of the premium that relates to practice expenses cover (see BIM42115).