Sarah Bradford looks at a new tax exemption from a benefit-in-kind charge for employees.
A new tax exemption came into force on 1 January 2015. From that date no benefit-in-kind charge arises where an employer meets the cost of recommended medical treatment.
Recommended medical treatment
The exemption only applies to `recommended medical treatment’. This is medical treatment that is provided to the employee in accordance with a recommendation which:
- is made to the employee as part of occupational health services provided under the Employment and Training Act 1973, s 2 (which covers arrangements for the purposes of assisting the employee to retain employment, etc.) or by, or in accordance with, other arrangements made by the employer; and
- is made for the purposes of assisting the employee to return to work after a period of absence due to injury or ill-health.
In addition, the associated regulations require that the recommendation for medical treatment must be given after the employee has been assessed by a health care professional as unfit for work, or is expected to be unfit for work for at least 28 days. A health care professional is a registered medical practitioner, a registered nurse or an occupational therapist, physiotherapist or psychologist registered with a regulatory body established under the Health Act 1999.
This requirement is treated as met if the employee has already been off work for 28 consecutive days due to injury or ill-health.
The recommendation must be made in writing and confirm the treatment that is recommended.
Return to work
To qualify for the exemption, the medical treatment must be for the purpose of assisting the employee to return to work after a period of absence due to injury or ill-health. However, the Government recognises that there may be a delay between arranging the treatment once the recommendation has been made and that in some cases, with the support of the employer, the employee may be able to return to work either before the treatment starts or while it is on-going.
Where the treatment does not start until after the employee has returned to work the exemption still applies as long as the treatment start within 14 days of the employee’s return to work.
If an employee has been ill for some time, he or she may be unable to immediately return to the same job and for the same hours. The exemption requires only that the treatment is recommended to assist the employee in returning to work, not that the employee returns to work in the same capacity and on the same hours as previously. Treatment that enables the employee to return in a reduced capacity or on a phased return should fall within the terms of the exemption.
If the treatment is delayed or if the treatment is to help the employee perform his or her duties better after returning to work rather than to return to work, the exemption may be compromised.
Cap on exemption
The exemption is limited to the first £500 of recommended medical treatment per employee per tax year.
Example – Annabelle benefits from new exemption
Annabelle suffers a back
injury, and as a result she is unable to work. After she has been absent from
work for six weeks, the Fit For Work service provide a return to work plan,
recommending a course of physiotherapy costing £950, which is paid for by
Annabelle’s employer. After the treatment has been completed, Annabelle returns
to work.
The exemption covers the
first £500 of the treatment and Annabelle suffers a benefit-in-kind charge on
£450 (i.e. £950 - £500).
Practical Tip:
Employers may wish to take advantage of this exemption to reduce absence.
