18 November 2023
In July 2023 the government issued a consultation document entitled ‘Tax incentives for occupational health’, inviting opinions on the case for expanding the existing benefit in kind tax exemptions for certain medical benefits to encourage greater employer provision of occupational health (OH) services.
In the Spring Budget 2023 the government acknowledged the increase in employment inactivity related to ill health. According to the Office for National Statistics Labour Market statistics published in September 2023, for every 12.6 people currently working, one person is on long term sick leave. Whilst many people would conclude that addressing issues within the NHS should be the priority, the government believes that employer-led OH services play an important part in maintaining a happy and healthy workforce and should be encouraged.
Unfortunately, the statistics quoted in the consultation tell us that, currently, only 45% of workers in Great Britain have access to OH services, and for various reasons provision of OH services is far more prevalent in larger businesses compared to smaller businesses. The government is therefore exploring options to help increase the coverage and supply of OH services and as part of this it is considering the case for support for such provision through tax incentives.
Current tax reliefs
Subject to various conditions the following benefit in kind tax and National Insurance contributions (NICs) exemptions are currently available.
Recommended medical treatment funded by an employer to help employees return to work
Where an employee has been assessed by a healthcare professional as unfit for work, or is expected to be unfit for work due to injury or ill health for at least 28 consecutive days, the cost of medical treatment (up to £500 per tax year) is not regarded as a taxable benefit where the treatment is provided for the purposes of assisting the employee to return to work.
Cost of annual health screening and medical check-ups
Employers can meet the cost of one health-screening assessment and one medical check-up per employee per tax year tax and NICs free.
The cost of welfare counselling, including cognitive behavioural therapy, provided by an employer to employees is exempt from tax and NICs unless it relates to an excluded activity such as tax, leisure and recreation, legal or financial matters (advice on debt problems is permitted).
Eye tests and glasses or contact lenses
Where an employee is required to use a visual display unit as part of his or her normal duties, no taxable benefit arises on the provision of either an eyesight test or the cost of corrective glasses or contact lenses. This is subject to the test being required under Health and Safety at Work regulations and on condition that the eyesight test and corrective appliances are available generally to all employees for whom they are required.
Importantly though, as covered in Employee eye tests – is HMRC losing sight?, the current HMRC stance is that where the cost of an eyesight test, spectacles or contact lenses is reimbursed to the employee, as opposed to being paid directly by the employer, for example as part of a corporate account, a taxable benefit arises.
What additional tax incentives could be considered?
Whilst on the one hand the consultation document welcomes views on alternative tax incentives, it clearly states that the government does not see a case for providing tax relief for various costs including private medical insurance, gym memberships or wellness retreats.
RSM responded to the consultation with a number of suggestions. We believe that there are some straightforward changes that could be considered, including simplifying the conditions for the current recommended medical treatment exemption (see above), as well as increasing or even removing the current £500 cap on exempt costs. We also suggested that where the cost of a benefit such as the provision of eye tests/corrective glasses and flu vaccinations is tax and NICs exempt when paid for directly by the employer, the exemption should also be available where the cost is initially borne by the employee and later reimbursed by the employer. This would particularly assist smaller employers that are less likely to have corporate accounts in place.
As a wider consideration, we believe that the introduction of tax and NICs exemptions to cover the cost of employer provided preventative treatment for healthcare issues that may cause long-term absences would also be beneficial, including certain dental treatments, hormone replacement therapy and an extension of the welfare counselling exemption to cover related costs around legal, financial and tax advice.
We also believe that the government should not underestimate the challenges faced by employees with caring responsibilities, and in some instances the extension of tax reliefs to cover relatives of employees could help facilitate an earlier return to work for many long-term absentees.
It is important to not lose sight of the fact that any additional tax reliefs are still dependent on employers incurring the costs in the first place. In this respect, the introduction of a super-deduction on costs incurred by employers on the provision of OH services would be a welcome incentive for them to do so. The consultation document closed for responses on 12 October 2023, and we will be watching carefully to see if any proposals for change are put forward when the chancellor presents his Autumn Statement on 22 November 2023.
For more information, please get in touch with David Williams-Richardson or your usual RSM contact.