Medical and dental treatment and insurance

By Tolley in association with Philip Rutherford

The following Employment Tax guidance note by Tolley in association with Philip Rutherford provides comprehensive and up to date tax information covering:

  • Medical and dental treatment and insurance
  • Introduction
  • Medical expenses and insurance
  • Exemption for recommended medical treatment
  • Tax and reporting requirements
  • Medical check-ups
  • Eye tests and visual display unit related prescriptions
  • Overseas medical expenses
  • Post-retirement medical insurance
  • Operational risk injuries and occupational diseases
  • Permanent health insurance
  • Salary sacrifice


The provision of medical related benefits to employees is one of the most common benefits provided by employers. If an employer provides insurance or pays for medical treatment for an employee a tax liability usually arises.

Medical expenses and insurance

Unless one of the exemptions outlined below applies, the provision of medical treatment, the reimbursement of expenses or provision of insurance by an employer will be a taxable benefit. The reason being that the provision of health-related benefits inevitably have private elements to them.

Medical insurance

An employer may take out a medical insurance policy to cover his employees which may or may not include cover for members of the employees’ families. Such insurance cover is a taxable benefit.


The amount of the taxable benefit is the cost to the employer of providing the insurance cover. Typically, the cost to the employer will be clear from the insurance policy. In some circumstances the employer may take out a group insurance policy where the cost of each individual employee’s insurance is not clear. In such a circumstance HMRC will accept a reasonable apportionment of the costs between each employee covered. This is in line with the general rule in ITEPA 2003, s 204 which allows for a reasonable apportionment of costs where an expense relates partly to the provision of a benefit for an employee and partly to other matters.


If an employer has a scheme under which different groups of employees are provided with different levels of cover then the costs should be apportioned on a just and reasonable basis based on the level of cover.

For example, if a group insurance policy costs £10,000 a year and the employer has 100 employees and each one is entitled to individual cover, HMRC would accept that the

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