Employer Paid Medical Insurance Premiums

Tax Briefing Issue 43 included an article on the treatment of Medical Insurance Premiums paid by an employer. This explained that where the employer pays the premium it will be paid net of tax relief. The employee will continue to be charged on the perquisite, net of tax relief at the standard rate. To maintain the status quo prior to the tax year 2001, the tax relief at source given to the employer will be recovered. Section 112A TCA 1997 applies the provisions of Section 238 to recover the tax due.

In the case of a company, the tax is due within 6 months of the end of the accounting period in respect of which the charge arises. In the case of an individual or a partnership, Revenue accepts that the tax due may be paid up to the specified return date in relation to the year of assessment to which the charge relates. For example, in relation to premiums paid in the short tax year 2001, the tax will be due by 31 October 2002.

Revenue accepts that the tax may be accounted for by the precedent acting partner, where the employer is a partnership. The tax paid is allowed as a deduction in arriving at the partnership profits.

While, in strictness, the tax to be remitted is the tax computed by reference to premium payments made in the tax year, employers may opt to account for the tax by reference to premium payments made in the basis period for the tax year. Where an employer opts to pay the tax on this basis, tax for future periods should be accounted for on the same basis. For the tax year 2001, premium payments made in the part of the basis period commencing on 6 April 2001 should be included. The definition of basis period in Section 303 TCA 1997 should be applied where there are intervals between basis periods or where basis periods overlap. The tax should, of course, be taken into account in calculating the Preliminary Tax payable.