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Medical costs and welfare benefits

18 June 13 | By: Jas Jhooty

Introduction

This week we will be having an in-depth look into the Tax & NIC treatment of different types of medical costs and welfare benefits provided by employers to their staff.

Private medical costs and insurance for employees

This is by far the most popular benefit-in-kind given to employees by their employers. A benefit will only arise if the employee is earning above the rate of £8,500 per year. Therefore there is no benefit to declare on P9D forms. If the employer pays for these costs a P11D benefit arises that has to be returned in Box I of the P11D. Class 1A NIC is also due and payable on these costs by the employer.

This is also the benefit that is most likely to be payrolled. Unfortunately doing this no longer negates the requirement to complete P11D forms. Current HMRC instructions are to enter the amount that has been payrolled in the amount made good box of Section I of the P11D leaving nil taxable (Class 1A NIC is still payable though). Don’t forget that if you are payrolling medical insurance costs that no Class 1 NIC is to be deducted.

If you are reimbursing an employee for any medical costs that they have personally paid for then these payments should be subjected to the payroll for PAYE tax and Class 1 NIC. This is because you are reimbursing a bill that remains the employee’s legal liability (i.e. their pecuniary liability).

Medical treatment for retired employees

If you are generous enough to continue to provide medical treatment or insurance to retired employees then usually there is no tax or NIC charge unless it represents: -

  • a specific part of a retired person’s pension, or
  • a supplementary pension or part of an unapproved or employer-financed retirements benefits scheme, or
  • part of a termination package.

The benefit may have to be apportioned in the year of retirement.

Overseas medical costs

There is a statutory exemption for any overseas medical costs providing these are incurred while the employee is travelling abroad on business.

Health screening

The costs of providing one annual health screening or medical check-up to ascertain the state of an employee’s health is tax & NIC free. Retired employees can also receive this benefit without incurring a tax or NIC liability as long as they received one such screening whilst they were employed.

Seasonal flu immunisation

The cost to employers of getting their employees immunised against seasonal flu jabs is exempt as they are considered to be trivial benefits by HMRC. Strangely immunisation costs against pandemic flu or other communicable diseases are obviously not as important to HMRC as the seasonal flu jab as these are still deemed to be taxable & subject to NIC

VDU users eye tests

eyetest

Those readers who are getting on a bit will recognise that VDU (Visual Display Units) used to be the anachronistic name for computer monitors. The legislation allows for one free eye-test per year for employees who are required to use a VDU as part of their normal work, (pretty much all of us nowadays!) If it is found that corrective glasses or contact lenses are required solely for VDU work then these costs whether paid for by the employer or employee are both tax & NIC free.
However before we all rush off to Specsavers, the cost of glasses or contact lenses required for general use is not exempt. Only if part of the prescription relates to VDU work can that proportion of the cost of the glasses or contact lenses be exempt from a chargeable benefit.

Finally if you are thinking of having the costs of your laser eye surgery met under this exemption, then you are out of luck. The statutory exemption only refers to corrective appliances not surgical intervention!

Welfare counselling
All types of welfare counselling provided by employers used to be non-taxable. However HMRC have recently tightened up their rules as to what types of welfare counselling can continue to be provided tax free with a view to removing the tax-free exemption for all welfare counselling at some stage. These allowable welfare counselling types are: -

  • Stress
  • Problems at work
  • Debt problems
  • Alcohol and other drug dependency
  • Career concerns
  • Bereavement
  • Equal Opportunities
  • Ill-health
  • Sexual Abuse
  • Harassment and Bullying
  • Conduct & Discipline
  • Personal Relationship Difficulties.

For the purposes of the exemption, welfare counselling is counselling of any kind except:-

  • medical treatment of any kind, or
  • advice on finance, other than advice on debt problems, or
  • advice on tax, or
  • advice on leisure or recreation, or
  • legal advice

How emTax can help?

We hope you found this week’s newsletter both informative and entertaining. For more detailed advice on this or any other employment tax related matter, please do not hesitate to contact us.

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