Employment Tax

Medical and dental treatment and insurance

Produced by Tolley
  • 13 May 2022 09:51

The following Employment Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Medical and dental treatment and insurance
  • Introduction
  • Medical insurance
  • Value of benefit
  • Apportioning costs
  • Reporting
  • Medical treatment
  • Treatment costs met or reimbursed
  • Treatment arranged and paid for by the employer
  • Exemption for recommended medical treatment
  • More...

Medical and dental treatment and insurance

Introduction

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, an income tax and NIC liability usually arises.

Medical insurance

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

Any claim made under such a policy for treatment is not a taxable benefit in itself as the taxable benefit arising to the employee is as described above. The treatment provided under the terms of the insurance policy is met by the insurance company and so is not taxable on the employee.

Value of benefit

The amount of the taxable benefit is the cost to the employer of providing the insurance cover (see the Cost to provider and money’s worth guidance note). Typically, the cost to the employer will be clear from the insurance policy and is often based on the age of the employee.

If an employee is required to make a contribution towards the cost of the insurance, the amount of taxable benefit is reduced by the amount of the employee’s contribution.

Apportioning costs

In some circumstances, the employer may take out a group insurance policy where the cost of each individual employee’s insurance is not clear. HMRC will accept a reasonable apportionment of the costs between each employee covered per ITEPA 2003, s

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