HM Treasury and HMRC have opened a joint consultation ‘Tax incentives for occupational health’. This explores how the tax system can support employers to increase the provision of occupational health services for their employees.
The consultation states that employer-led occupational health services play an important part in addressing the leading causes of ill-health-related inactivity by:
- Helping to address the impacts of an individual’s health conditions in the workplace.
- Supporting employees to remain healthy and happy in work.
To this end, the consultation considers the merits of increased tax incentives, particularly extending the Benefit In Kind (BIK) exemption for medical benefits, with a view to encouraging greater employer provision of occupational health services.
The existing Medical Benefit in Kind exemption covers certain:
- Recommended medical treatment funded by an employer to help employees return to work.
- Cost of annual health screening and medical check-ups.
- Welfare counselling.
- Eye tests and glasses or contact lenses.
The consultation seeks to understand what health services are currently provided by different sizes of businesses, their motivations for doing so, and typical spending on such services.
It is proposed to expand the scope of the current exemption, to include:
- Health screenings for employees, within a specific predefined limit.
- Medical check-ups for employees, within a specific predefined limit.
- Treatments that aim to reduce workplace absence or enable employees to perform better, as well as preventative treatments.
- Flu vaccinations, where paid for by the employee and later reimbursed by the employer.
Views are sought on the merits and disadvantages of these proposed extensions.
The tax treatment of other costs is intended to remain unchanged as the government does not see the case for providing relief. These include:
- Private medical insurance for employees.
- Non-clinical treatments, such as wellness retreats, fitness classes, or gym memberships.
- Costs relating to family members of employees.
- Costs relating to persons that are not employees.
Views are also welcomed on the appropriateness of this conclusion, along with whether there are alternative tax incentives that would be more effective in incentivising businesses to invest in occupational health.
Responses can be made online. The consultation closes at 2 pm on 12 October 2023.
The case for action
Question 1: Why do employers provide OH services to their employees? For example, it could be to increase workplace participation, increase workplace performance, or for the health and well-being of the employee.
Question 2: What OH treatments are most commonly provided to employees? Have you observed any changes to this since the COVID-19 pandemic?
Question 3: What OH treatments are most effective for improving workplace participation, or effective at achieving other objectives (e.g. performance or health outcomes)?
Question 4: How much do employers typically spend on OH services? Does the existence of the £500 cap on recommended medical treatment influence the amount that employers are likely to spend on OH services?
Question 5: To what extent does the tax treatment of OH services affect the decisions employers make on whether to provide OH services and what to provide as a part of them? For example, would an employer be more likely to offer a treatment that is exempt than one that is not, and to what extent is that decision influenced by the tax treatment?
Question 6: Small and Medium Enterprises are significantly less likely to offer OH services. Why is this? Are there other characteristics of employers that tend them towards offering less or more OH services?
Question 7: How would any of the proposed additional treatments listed above enable you to support increased OH provision and improve workforce participation? Do you have any other comments on these proposals? If so, please comment on each in turn.
Question 8: For each of the categories of treatments that are currently available, is the existing definition appropriate and does it support OH provision or does it create issues?
Question 9: Are there are other costs that should be in scope, and how would they help achieve our goal of improved OH provision and greater labour market participation?
Question 10: Do you have any views on the drawbacks of expanding BiK reliefs?
Question 11: Do you see a case for any of the above costs being in the scope of additional tax relief under the BiK exemption? If so, please discuss why, and how this would help achieve the government’s objective of increasing employer provision of OH services and labour market participation.
Alternative tax incentives
Question 12: Are there alternative tax incentives that you think would be more effective in incentivising employers to invest in OH services for employees? If so, please explain why.
Question 13: Are there particular tax incentives that would be better suited to helping small and/or medium-sized businesses invest in OH services?
Question 14: To what extent would tax incentives be more effective in increasing employer investment in OH, compared to legal measures to provide OH, which could vary by the size of the business?
Question 15: Do you have any comments on the government’s expectations regarding Exchequer impacts?
Question 16: Would businesses seek to increase their overall investment into OH, if the exemptions from BiK rules were expanded in line with the suggestions in the chapter “Scope”? If so, to what extent?
Question 17: Do you have any comments on the government’s assessment that tax incentives would positively impact the health of employees and lead to both fewer employees leaving the workforce and encouraging those currently employed to return to the workforce?
Question 18: Do you agree that tax incentives for providing access to occupational health services will promote a stronger culture in the UK of employers taking good care of employee health?
Question 19: How significant could the economic benefits of greater OH provision in the UK be?
Question 20: Do you have suggestions on how the effectiveness of these changes could be monitored?
Question 21: If you are an employer, what are the formal processes around spending on OH? For example, do you have an annual budget that you must work within, or is this flexible and dependent on the needs of the business and employees in that time period?
Question 22: Do you have views on how best to minimise the administrative burdens for businesses, as a result of new OH tax incentives?
Question 23: Do you have views on how best to minimise the complexity associated with new OH tax incentives?
Question 24: Do you have any views on the implications of the proposal in this consultation for you, or the group or business you represent, and on anyone with a relevant protected characteristic? If so, please explain who, which groups, including those with protected characteristics, or which businesses may be impacted and how.
Question 25: Do you have any comments on the territorial impacts?
Question 26: Do you have any comments on the impacts on HMRC and other public sector delivery organisations?
Useful guides on this topic
Eye tests and glasses
Can you provide staff with eye tests? Is there a taxable benefit if you provide employees with eye tests or glasses?
Medical benefits and health checks
What are the tax implications if an employer provides an employee with a medical health check and associated medical treatment?
Employers can provide sporting or recreational benefits tax-free to employees. What is excluded? How should an employer structure benefits?
Where an individual incurs a liability personally but it is paid by their employer special rules apply. This is referred to as settlement of a Pecuniary Liability.
Payrolling of benefits
The value of certain taxable Benefits In Kind can be included in taxable pay when calculating the PAYE deducted from payments of wages and salaries to employees.