Company reimbursing private health care - tax implications
Discussion
The company that I work for offers private healthcare cover but I need to source it privately myself. I have been given a £250 a month allowance, which I submit as an expense and then they will reimburse me. Interestingly, it says in my contract that they will reimburse me with a grossed up figure, which will offset my tax liability for private healthcare being a benefit in kind.
Does that seem normal to you? It wasn't my understanding of how this works.
Does that seem normal to you? It wasn't my understanding of how this works.
It sounds to me like a viable way of doing it, essentially giving you "free" health insurance without the company having to faff about in administration or cope with poor claims records from sickly employees and/or their families.
£3,000 p.a. sounds a decent start but I guess the actual premium will vary according to age, marital status, children etc - assuming the benefit isn't restricted to just you personally.
£3,000 p.a. sounds a decent start but I guess the actual premium will vary according to age, marital status, children etc - assuming the benefit isn't restricted to just you personally.
I agree with all the advice above. Any company funded private healthcare is subject to tax as any other payments and BIKs.
What peeves me about the tax on this is that if the cover includes wife and family, then you are taxed on the whole cost, whereas it will not necessarily be you that benefits from the cover. It seems to me that the cost should be apportioned among those being covered individually so that they each pay their share of the tax as they get the benefit, not you.
R.
What peeves me about the tax on this is that if the cover includes wife and family, then you are taxed on the whole cost, whereas it will not necessarily be you that benefits from the cover. It seems to me that the cost should be apportioned among those being covered individually so that they each pay their share of the tax as they get the benefit, not you.
R.
Thanks for the feedback guys.
So let's just say that I used the full £250 monthly allowance for the sake of a demonstration.
The company will gross up my expense by my tax band. So let's just say this is 40%.
They will then pay me £350.
What figure do I declare in my self assessment? Is it the actual cost to me of the healthcare product - £3,000? Then the gross payments that the company has made to me I just pay to HMRC? That's the confusing bit.
So let's just say that I used the full £250 monthly allowance for the sake of a demonstration.
The company will gross up my expense by my tax band. So let's just say this is 40%.
They will then pay me £350.
What figure do I declare in my self assessment? Is it the actual cost to me of the healthcare product - £3,000? Then the gross payments that the company has made to me I just pay to HMRC? That's the confusing bit.
I'm not sure you would have to include this in SA at all. The company will pay you a sum of money that you will pay tax at applicable rates on. Private healthcare isn't an expense you can offset against tax paid. The fact you then use the NETT sum to buy a heathcare policy isn't of interest to HMRC. Much like a company car allowance. Taxed at source, how much I actually spend on a car (be it less or more than the nett allowance) isn't of relevance
The Stiglet said:
So let's just say that I used the full £250 monthly allowance for the sake of a demonstration.
The company will gross up my expense by my tax band. So let's just say this is 40%.
They will then pay me £350.
What figure do I declare in my self assessment? Is it the actual cost to me of the healthcare product - £3,000? Then the gross payments that the company has made to me I just pay to HMRC? That's the confusing bit.
If you are PAYE surely this amount will appear on your payslip & you'll pay NI & tax at 40% on the £350 (assuming your're a HR taxpayer). If they are paying you lump sums you'll need to declare the £350 on an SA return for & get assessed for tax & NI.The company will gross up my expense by my tax band. So let's just say this is 40%.
They will then pay me £350.
What figure do I declare in my self assessment? Is it the actual cost to me of the healthcare product - £3,000? Then the gross payments that the company has made to me I just pay to HMRC? That's the confusing bit.
Thanks for that. I think that because they are a French company, the 'translation' hasn't necessarily comes across so clearly. I think they mean they will pay my gross tax liability through payroll as a PAYE.
However, if there is no personal allowance then I am assuming I will need to make a cash payment via self assessment or a changed tax code in the following year once they have received the P11D. Is that right?
However, if there is no personal allowance then I am assuming I will need to make a cash payment via self assessment or a changed tax code in the following year once they have received the P11D. Is that right?
The Stiglet said:
Thanks for the feedback guys.
So let's just say that I used the full £250 monthly allowance for the sake of a demonstration.
The company will gross up my expense by my tax band. So let's just say this is 40%.
They will then pay me £350.
What figure do I declare in my self assessment? Is it the actual cost to me of the healthcare product - £3,000? Then the gross payments that the company has made to me I just pay to HMRC? That's the confusing bit.
You'd put the gross figure in your self assessment, you'd pay the tax on that. You should be left with a nett figure the same as your actual payments.So let's just say that I used the full £250 monthly allowance for the sake of a demonstration.
The company will gross up my expense by my tax band. So let's just say this is 40%.
They will then pay me £350.
What figure do I declare in my self assessment? Is it the actual cost to me of the healthcare product - £3,000? Then the gross payments that the company has made to me I just pay to HMRC? That's the confusing bit.
The Stiglet said:
Thanks for that. I think that because they are a French company, the 'translation' hasn't necessarily comes across so clearly. I think they mean they will pay my gross tax liability through payroll as a PAYE.
That doesn't make sense - if they pay you the tax liability via payroll then you'd be paying tax on it!You seemed to be saying earlier they'd pay it gross through expenses?
This is my take
OP finds out how much a private heathcare contract will cost (makes no real difference if it's paid monthly, annually or whatever), tells employer. The employer then pays the OP a sum of money via payroll to allow him to take up this contract. In order that the OP is not out of pocket, the employer includes any tax liabilities the sum of money (not the heathcare contract) will attract. OP, don't forget you may well have Employees NI deductions as well as income tax deductions
Not the best immediate VFM for the employer as they will have to pay Employers NI on the sum as well, but the simplification of the admin for them may make it worth their while
Self assessment is not relevant in the above case IMHO
OP finds out how much a private heathcare contract will cost (makes no real difference if it's paid monthly, annually or whatever), tells employer. The employer then pays the OP a sum of money via payroll to allow him to take up this contract. In order that the OP is not out of pocket, the employer includes any tax liabilities the sum of money (not the heathcare contract) will attract. OP, don't forget you may well have Employees NI deductions as well as income tax deductions
Not the best immediate VFM for the employer as they will have to pay Employers NI on the sum as well, but the simplification of the admin for them may make it worth their while
Self assessment is not relevant in the above case IMHO
mfmman said:
This is my take
OP finds out how much a private heathcare contract will cost (makes no real difference if it's paid monthly, annually or whatever), tells employer. The employer then pays the OP a sum of money via payroll to allow him to take up this contract. In order that the OP is not out of pocket, the employer includes any tax liabilities the sum of money (not the heathcare contract) will attract. OP, don't forget you may well have Employees NI deductions as well as income tax deductions
Not the best immediate VFM for the employer as they will have to pay Employers NI on the sum as well, but the simplification of the admin for them may make it worth their while
Self assessment is not relevant in the above case IMHO
Just confirmed with employer and this is their plan. I thought it was expenses at first but it's not so thank you for the summary.OP finds out how much a private heathcare contract will cost (makes no real difference if it's paid monthly, annually or whatever), tells employer. The employer then pays the OP a sum of money via payroll to allow him to take up this contract. In order that the OP is not out of pocket, the employer includes any tax liabilities the sum of money (not the heathcare contract) will attract. OP, don't forget you may well have Employees NI deductions as well as income tax deductions
Not the best immediate VFM for the employer as they will have to pay Employers NI on the sum as well, but the simplification of the admin for them may make it worth their while
Self assessment is not relevant in the above case IMHO
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