Medical Treatments: Tax Allowances

Treasury written question – answered on 13th March 2019.

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Photo of Martin Vickers Martin Vickers Conservative, Cleethorpes

To ask the Chancellor of the Exchequer, with reference to EIM21774 of the Employment Income Manual, what assessment he has made of the effectiveness of the tax exemption for employer-funded medical treatment; and what estimate he has made of the (a) cost to the public purse of implementing that exemption, (b) savings accrued to the public purse of the use of that exemption and (c) amount that has been claimed by employers under that exemption since its introduction.

Photo of Martin Vickers Martin Vickers Conservative, Cleethorpes

To ask the Chancellor of the Exchequer, what discussion he has had with the Secretary of State for (a) Work and Pensions and (b) Health and Social Care on reform of the tax exemption for employer-funded medical treatment.

Photo of Martin Vickers Martin Vickers Conservative, Cleethorpes

To ask the Chancellor of the Exchequer, whether he has any plans to amend the Income Tax (Recommended Medical Treatment) Regulations 2014 to incentivise employers to support staff returning to work after a period of sickness absence; and what assessment he has made of the effect of the 28 consecutive day qualifying period on the number of staff returning to work.

Photo of Mel Stride Mel Stride Financial Secretary to the Treasury and Paymaster General

Employers normally incur expenditure on employee healthcare for a business purpose and can deduct this when calculating the employer’s own taxable profits.

However, from 1 January 2015, the Government also exempted any benefit in kind or payment of earnings, up to an annual cap of £500 per employee, from a charge to income tax when an employer meets the cost of recommended medical treatment. There is also a corresponding National Insurance contributions disregard.

Medical treatment is recommended where it is provided in accordance with a recommendation from an occupational health service in order to help an employee return to work after a period of absence due to ill-health or injury. The 28 consecutive day qualifying period makes sure that the tax exemption is targeted at those cases in greatest need of support. Evidence showed that sickness absence cases lasting four weeks or longer were at the greatest risk of turning into long term cases.

The Government ensured that this exemption would be easy to understand and administer, so employers do not need to inform HMRC about payments for treatments covered by the £500 per employee per year limit. This means that information is not available to assess the direct impact of the exemption. However, the Government estimated in 2014 that employees working for approximately 10,000 businesses each year would benefit and Table 2.2 of Budget 2014 set out the expected cost to the Exchequer of £20 million per annum by 2018-19.

The Government keeps all taxes under review.

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