Medical Insurance
Step 1: Ascertain whether benefit employer wishes to provide is exempt or not.
Which benefits are exempt? Click here for answer
Step2: If benefits are not exempt, we need to report them to HMRC and deduct tax and NIC but it depends on who pays for the benefit.
| Who Pays | Who pays What |
| Employer arranges and pay directly to insurance company | Employer Class 1A NIC via P11d Employee – income tax via Self-assessment but pays no NIC. |
| Employee arranges but employer pays to insurance company | Employer Class 1A via P11d Employee – income tax via Self-assessment Employee pays NIC via payroll by adding value of benefit to employee’s earning. |
| Employer reimburses employee | Employer pays Class1A and employee pay Class1 NIC and Tax. All collected via payroll. |
Conclusion: Best option is employer to arrange and pay provider directly. Please note cost of insurance and class 1A NIC will be tax deductible for employer as an expense.
Source:
Expenses and benefits: medical or dental treatment and insurance – GOV.UK (www.gov.uk)
Life Cover
No liability to income tax arises if the employer arranges and pays for a `retirement or death benefit`.
Retirement or death benefit – means a pension, annuity, lump sum, gratuity or other similar benefit which will be paid in the event of the employee’s retirement or death.
Smaller companies can think about Relevant life cover.
Source
Section 307 ITEPA 2003
Roy Accountants 