Tax relating to Private Medical Insurance for Business

The main reason businesses buy Private Medical Insurance (PMI) for their employees is that PMI offers quick access to private medical treatment which is good for the employee, and also good for the business, as it can mean that the employee may be off work for less time than may have been where the employee has had to wait to receive treatment through the NHS.

When a business buys PMI for its staff there are a number of tax implications both for the business and the employees which are briefly explained below;

This information is a general guide only and may change at any time. You should always talk to your accountant or check the HMRC website for the most up to date or specific information relating to your business.

1. Insurance Premium Tax (IPT)
   The premium you pay for PMI is subject to IPT at the standard rate which from June 2017 is 12%.
2. VAT
   Most PMI schemes are Insurance based so are not subject to VAT, however, with some schemes if a non-insured non-medical service is included VAT may be charged on the value of that service.
3. Corporation Tax Relief
   Buying PMI is considered a business expense so the cost attracts tax relief at the current corporate rate. For unincorporated businesses, the cost of PMI can be deducted from taxable profits.
4. Employee Tax
   When a business provides PMI for employees, the employee is considered to have received a Benefit in Kind so the employee is taxed on the individual benefit value…..that is, the premium the business pays for the employees PMI.

If you have any general questions relating to Private Medical Insurance and Tax please do not hesitate to contact us, however, we do not give or offer specific Tax advice.