How Changes to Tax Relief on Private Medical Insurance affects employers
Tax Relief on Private Medical Insurance
Tax Relief changes to Private Medical Insurance affects all those paying premiums to private medical providers. This article explains the impact on employers paying private medical insurance premiums for their employees.
Introduction – Tax Relief on Private Medical Insurance
Finance (No.2) Act 2013 introduced a limit on the amount of tax relief available on Medical Insurance premiums for policies renewed or entered into on or after 16 October 2013.
Prior to the above change tax relief was available on the full gross premium paid.
For policies renewed or entered into on or after 16 October 2013 the tax relief per person covered by a policy will be limited to either:
Per adult, the lesser of the premium paid in respect of that individual, or €1,000 and
Per child*, the lesser of the premium paid in respect of that child, or €500.
*A child for the purposes of this tax relief means an individual under the age of 18 years or, if over 18 years and under the age of 23 years, is receiving full-time education and in respect of whom a child premium is paid.
Tax relief continues to be granted at 20% on the amount eligible for tax relief.
Private Medical Insurance Premiums paid by Employer
Where an employer pays private medical insurance premiums on behalf of an employee and/or his or her dependants, a Benefit in Kind charge will arise. PAYE, PRSI and Universal Social Charge (USC) will be deducted by the employer in respect of the value of the benefit provided. In these circumstances the employee has not benefited from the TRS arising on the medical insurance premium paid by the employer and he or she is entitled to tax relief in his or her tax credit certificate (TCC).
The following examples illustrate how tax relief is applied where medical insurance premiums are paid by employers.
Facts Relevant to Examples 1 & 2:
Insurer notifies individual of detail of calculation of premium based on choice of policy
Gross premium = €1,500
Tax relief at Source (TRS) = €200 (€1,000 @ 20%).
Net Cost = €1,300
Insurer will advise of total relief arising on particular policy. If premium less than €1,000 relief restricted to 20% of gross premium.
Tax relief is to be allocated on a pro-rata basis to the element of the premium paid by each party.
Example 1 – Single individual
Employer pays 100% of the premium with employee paying Nil
Gross premium paid by employer is €1,500
Tax relief related to employer share = €1,000 @ 20% = €200
Net payment to be made by employer to insurer will be €1,300
Employer pays €200 to the Collector-General
Gross premium paid by employee is Nil
|(Summarised in table below) Total||Employer||Employee|
|Gross premium paid||€1,500||€1,500||Nil|
|Tax relief related to this payment||€200 (€1,000 x 20%)||€ 200||–|
|Net paid to insurance company||€1,300||€1,300||–|
|Tax relief paid to Collector-General||€ 200||€ 200||–|
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