Can I claim tax relief on cost of herbal remedies?
Q My daughter has eczema and I have recently found that herbal remedies – rather than steroid creams – work best for her condition. The cost of these herbal remedies is quite high. Can I claim tax relief on this alternative medicine and how would I go about doing that? My family's medical bills tot up over the year. What kinds of medical expenses can I claim tax relief on?
Olivia, Glasnevin, Dublin 9
A The question of whether you can get tax relief on alternative medicines, such as herbal remedies or acupuncture, is not clear cut. The Revenue Commissioners has in the past allowed claims for expenses where a registered medical practitioner has referred a patient on for a treatment that could fall into the broader definition of alternative medicine, so a precedent of sorts exists. For example, Revenue has accepted tax relief claims where a GP referred a patient for acupuncture.
Tax relief is available for "drugs and medicines supplied on the prescription of a practitioner". Therefore, it would appear that if a registered practitioner prescribes a treatment, the cost of such treatment could be allowable, regardless of the classification of drug, medicine or remedy.
The best way you can make a strong case for claiming relief on alternative medicine is by getting a written confirmation from your GP or registered practitioner that the treatment has been prescribed – or that a prescription has been issued.
Regarding your other medical expenses, tax relief on medical expenses for doctor's visits are easily the most popular relief to be claimed – but remember to hold on to any receipts. While you are not required to submit receipts with a claim, expenses should not be claimed unless receipts have been retained for six years and are available for inspection. You can't claim tax relief for any medical expenses that were covered by your private health insurer.
Q I'm in a well-paid full-time job – but I am fed up losing more than half of my salary to tax. If I set up as a contractor, could I chop my income tax bill?
John, Naas, Co Kildare
A There are a number of ways to reduce the amount of income tax you pay. Most involve lowering the amount of income that is subject to tax. For example, pension contributions and investments in certain tax-efficient schemes, such as the Section 481 film tax relief scheme, can attract preferential tax treatment. Similarly, allowable expenses wholly and exclusively incurred in the course of business can reduce your taxable income.
June 2013 saw the roll-out of a nationwide Revenue investigation into the taxes of contractors. This review had particular focus on the thorny issue of expenses. While becoming a contractor still makes financial sense for many, you need to be careful that any expenses you write off against tax are legitimate.
Loopholes that allow any individual or company to "chop" their income tax bill will rarely be effective without similarly "chopping" their disposable income.
If an individual incorporates – that is, declares a corporate entity, which is separate to the owners of the company – cash extracted from the company will still be taxable. The individual will still pay income tax on their wages, regardless of whether they are taken as salary or as a dividend.
Barry Flanagan is a chartered tax consultant with contractors.ie
Sunday Indo Business