UK Limited Company paying third party medical costs

Question

I own and run a small limited company in the UK. Via one of our associates, we were recently approached by a 3rd party asking for help in paying medical bills for treatment that was not covered by an insurance.

To make the long story short, the company can and is willing to pay these medical bills (the amounts aren't that large).

I have basic account knowledge and for the last few years have been running company accounts myself. Yet I am struggling to understand how this payment would work. Obviously, I can record it as a cash expense, but I'm not sure how it would work from a tax point of view. As far I see, it's essentially a charitable payment, but there is no charity involved - the payment would be made directly to the hospital.

Things to note: the 3rd party is not related in any way to the company and is not a UK resident; the medical expenses are for treatment in a UK hospital; the payment would be in GBP directly to the hospital.

My question is: what are tax implications of this payment?

UPDATE: some more details. The associate is someone I met some time ago when travelling in that country. Our relationship is limited to occasionally referring business each other's way. There is no contract, no minimum referrals and certainly no compensation of any kind. Basically, he's a friend that lives in another country. The 3rd party is a relative of his. That country being 3rd world, they can't possibly afford UK medical costs, hence he asked me for help.

Answer 1

According to HMRC's manual BIM42105, you can't deduct expenses of this kind when calculating your profits for corporation tax:

No deduction is allowed for expenditure not incurred wholly and exclusively for trade purposes

So at the least, the company will have to pay corporation tax on this donation at some point, assuming it ever makes any profits.

There's also the risk that HMRC would say that what is really happening is that you are making a personal donation to this person and the company is giving you income to allow you to do it. In that case, you'd be liable to income tax and employees national insurance, and the company liable to employers national insurance. It should then be deductible from corporation tax, though.

Answer 2

One possibility to consider would be making an arrangement with a registered UK charity where you would donate the necessary amount for the specific purpose of covering medical costs of that particular person. Charitable donations are expressly deductible from business profits.

Some charities may be genuinely interested in helping people from developing countries get quality medical help that's not available in those countries. There may be some organizations in the proposed beneficiary's country that have contacts among the UK charities.

PS. I am not a lawyer or an accountant, nor do I claim to be either. The above is not a legal or accounting advice. Consider seeking professional assistance.