A health insurance policy that is paid for by you as an employer, on behalf of an employee, is considered to be a taxable benefit in kind by HM Revenue & Customs (HMRC).
Subsequently, this benefit should be reported to HMRC at the end of each payroll year, via the employers P11D submission. This is necessary whether it is you or your employee that is responsible for arranging the treatment or insurance.
The tax and National Insurance (NI) deductions that you must make do depend on who arranges the treatment. Deductions will also differ if you reimburse the costs incurred by employees.
HMRC’s guidance on what employers offering medical and dental treatment or insurance must report and pay can be found here.
Have you taken out a health insurance policy on behalf of your employees recently?
We have recently happened upon a couple of instances where clients have taken out health insurance policies, on behalf of their employees, but failed to notify us.
As a result, we have then had to file P11D’s for those employers, after the official 6 July deadline.
A penalty of £100 per 50 employees is levied for each month the form remains outstanding. HMRC can also charge up to £300, plus a further £60 per day, for as long as the failure to submit continues.
If you have recently purchased a health insurance policy, or are considering doing so, tell your adviser at the earliest opportunity.
The importance of P11D’s for making sure the correct tax is paid
A benefit in kind is given to an employee/director by their employer, but does not count towards their salary. This can include company cars, accommodation or childcare.
Since these benefits are paid for out of the company’s pre-tax earnings and supplied in addition to an employee’s salary, their remuneration has effectively increased without being subject to additional PAYE tax.
Employers must, therefore, deduct what is owed via payroll or declare expenses at the end of the tax year. Expenses declared at the end of the tax year will be valued and taxed accordingly.
A P11D form should be completed for the tax year in which any taxable benefits were provided. Employers must submit P11D’s to HMRC and give a copy to employees by 6 July.
What benefits should I be reporting on my P11D?
Despite our focus on health insurance for the purposes of this blog, it is not the only benefit that should be reported on your P11D. There are various other taxable benefits which should be declared, if you provide them to directors and employees, including:
- Living accommodation
- Company car
- Mileage allowances
If you offer taxable benefits to your employees and directors and you are unsure about whether you are declaring these appropriately, contact us today on 01480 426500.