LLP has arranged to pay medical insurance for one of the partners. Invoices are in LLPs name. BIM 45560 states that premiums paid for partners are not allowable deduction. I’m a but confused how to show it in accounts and tax return.
- Show as an employee expense and deduct from income in accounts. Disallow on the tax return.
Or
- Include it as Drawings (BS) in accounts and tax return and not to show it as an expense at all.
Thank you
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Thank you. As the invoices are under LLPs name, I wasn't sure if the accounts would show a true and fair picture if we put them as drawings rather than expense.
I would expense it and disallow it in the tax comp.
(But I would ask the client what their intention was first. Their answer might change my view.)
Thanks. The reason they did it is to reduce insurance premium. It was about £7K cheaper if the cover was arranged through a partnership rather than doing personally. When partners calculate their monthly draw downs, they allocate this as payment to a partner who took the cover.
If we treat it as drawings, it leads to another question. BUPA sends an invoice month in advance. For instance, they received an invoice on the 1st December for January and a payment Is taken on January 1st. So, on Dec 1st, do we book it as a prepayment and transfer it to drawings account on Jan 1st or put into partners drawings account even though the payment hasn’t been made yet?
Thank you
...they allocate this as payment to a partner...
i.e. they think it's drawings? Then so do I.