New tax guidance for employers on company paid healthcare

28 June 2012

New guidance on the tax implications for companies offering paid healthcare for their employees has been published.

Healthcare provider Simplyhealth has published the fact sheet which is geared towards larger employers providing healthcare benefits. It said previous guidance designed to help small and medium sized businesses with taxation issues regarding company paid healthcare could be extended to larger organisations as both are subject to the same tax implications.

Company paid health plans are paid for by the employer on behalf of the employee, and are often included in remuneration packages as an incentive to attract and retain staff.

Both the company, who purchases healthcare cover for their employees, and the employees receiving it, may be subject to pay tax on them. This is because company healthcare is considered by HMRC to be a staff 'benefit' or 'perk'.

Depending on the type of healthcare insurance purchased, employers and employees may be subject to taxes including insurance premium tax, national insurance contributions (NICs), income tax, corporation tax and VAT.

Insurance premium tax, for example, is charged at a standard rate of 6 per cent (increased from 5 per cent on the 4 January 2011). This is usually included in the insurance premium and cannot be reclaimed. However, in some instances healthcare cover may act as a deduction from business profits for corporation tax purposes.

Howard Hughes, head of business marketing for Simplyhealth, said the guide aims to explain the 'key costs' involved to both employer and employee, and provide organisations with examples of what the tax implications mean to them.

"We have included worked examples for private medical insurance, health cash plans and healthcare trusts which illustrate where certain taxes would be applied. We hope that the fact sheets provide organisations with a simple and useful guide to navigating UK tax requirements."

Simplyhealth stated it had produced the fact sheet for guidance purposes only and that it is not intended to provide tax advice. It recommended that employers seeking specific information should contact their tax advisor or HMRC.

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