Medical advice for companies
My client has a shoulder injury due to the work he does which is now stopping him from working. Is there a benefit in kind charge if his company pays for the operation he needs?
Employer costs for employee’s medical treatment are usually subject to PAYE as earnings or as a benefit in kind. However, there is an exemption to fund recommended medical treatment to help an employee return to work after a period of absence. Details of this exemption are found in S320C ITEPA 2003 and SI 2014/3227.
To apply the exemption, all four conditions listed below must be met. Please note that HMRC guidance EIM21774 incorrectly states that any one condition must be satisfied for the exemption to apply whereas the legislation tells us that all four conditions must be met for the exemption to apply. The conditions are
- That before the recommendation for medical treatment is made, the employee must have either been absent from work for at least four weeks or after being assessed by a health care professional that the health care professional thinks that the employee will be unfit for work for at least four weeks without the medical treatment
- The recommendation is made for the purpose of assisting the employee to return to work
- That the recommendation is provided to the employer and the employee in writing and specifies the medical treatment that is recommended
- That the recommendation for medical treatment is made as part of an occupational health service that has been provided to employees by the employer under S2 of the Employment and Training Act 1973 or within arrangements made by the employer
The exemption would apply only to the cost of the recommended treatment and would not apply to any related costs such as transportation to and from their treatment. A maximum cost of £500 in a tax year would be treated as exempt from tax. If the costs of the treatment are above this amount, then the excess would be taxable and reportable to HMRC in the usual way.
If the treatment includes treatment that is not part of the recommendation, then a reasonable apportionment would need to be made of the treatment costs to determine which are qualifying and which costs are non-qualifying.
The exemption is to help and support employees returning to work once they have reached or are expected to reach four weeks of absence from their employment. Due to this, the exemption would also cover any recommended treatment for the employee after they have returned to work where the treatment is linked to the return to work.
Any medical treatment costs provided under salary sacrifice arrangements or flexible remuneration arrangements would not be applicable for the exemption.
Further guidance can also be found in EIM21775 to EIM21777