Introduction »

To perk you up!

Protecting business assets is integral to any well managed business and in many instances employees are one of those key assets. Looking after their well-being could include looking at providing benefits in connection with health care but the tax treatment varies so take care.

Prevention is better

As the saying goes prevention is better than cure so health screening is a good place to start. An employer can provide one health screening assessment and/or medical check every year to employees tax-free. This exemption covers both income tax and national insurance.

The eyes have it

Employers may be required by law to provide, or meet the cost of, eye care tests and/or corrective glasses for their employees.
Where an employee is required to use a computer screen (also referred to as a visual display unit (VDU)) as part of his or her normal duties, no chargeable benefit will arise on:

• an eyesight test, and
• the cost of spectacles or contact lenses required solely for VDU use.

This is the position where the test is required under Health and Safety at Work regulations and, if shown to be necessary by the test, the corrective glasses or contact lenses are available generally to employees.

Where spectacles are for general use but also include a special prescription for VDU use, only that proportion of the cost relating to the special prescription will be tax exempt.

It does not matter how the employer pays for the eye test and/or corrective glasses, whether direct to the provider, by reimbursing the cost to the employee or by providing a voucher.

Private health care insurance

The cost of providing comprehensive medical insurance cover can be substantial but the access to private healthcare or dental treatment can prove to be a worthwhile investment when medical problems are identified and treated swiftly.

Such provision is however a taxable benefit on the employee, potentially liable at 40%/50% income tax. It is also reportable on form P11D and attracts Class 1A employers' national insurance currently at 12.8%.

An alternative policy could be to pay for private health treatment on an arising basis, a type of pay-as-you-go arrangement. Any costs incurred by the employer would again amount to a taxable benefit but there may be scope for including such one off benefits in a PAYE settlement agreement. This is an annual agreement whereby the employer agrees to account for the tax and national insurance on certain minor or irregular benefits rather than include them on form P11D/payroll. If you require further information on PAYE settlement agreements please do contact us.

Working overseas

Where overseas working is part of the duties of employees and/or directors, medical cover would appear to be common sense. In these circumstances payment by the employer for any foreign element is tax free. This means that:

• any specific payment for overseas medical treatment is exempt
• a premium for overseas medical insurance cover only is exempt
• the cost of general cover in the UK and overseas would have to be apportioned on a reasonable basis with only the overseas element being tax-free.

Do contact us if you are looking to review any elements of your remuneration packages for further advice.

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