HM Revenue & Customs (HMRC) has confirmed that employer-provided annual health screening and medical checks will be exempt from tax from 6 April 2009, bringing to an end months of uncertainty.
The government will include legislation in the forthcoming Finance Bill to allow the provision of these perks to be exempt from tax even if employers do not offer them on generally similar terms to all employees – a requirement previously stipulated by HMRC.
This means that the tax and national insurance contributions (NICs) treatment of employer-provided health screening and medical checks will be broadly the same as it was under regulations introduced in August 2007 which exempted these perks from tax.
In October 2007, however, HMRC backtracked on its decision and held off introducing the new tax rules which stated that the exemption from tax only applies to the benefit if it has been supplied to all employees and fully funded by the employer. The reason it gave for this move was a lack of clarity about the impact it would have on employer’s health screening schemes.
HMRC has since consulted on the impact of the new rules and did not collect any tax and national insurance contributions on health screening benefits or medical check ups for 2007 and 2008.
Lesley Fidler, tax director at Baker Tilly, said:”HMRC has been criticised for giving tax exemptions by administrative concession after Parliament has set out what it wants to tax in its legislation but, however †unconstitutional such practice may be, it has the considerable advantage of flexibility. The saga of the health screening tax charge (and/or exemption) demonstrates the problems of trying to produces workable legislation to fit the wide range of circumstances that occur in employment, particularly if the full extent of the issue has not been appreciated at the start.”
Ben McGannan, managing director of wellbeing programmes at Water Wellpoint, said: “It’s a very welcome move, and is entirely in keeping with the Government’s response to and support of Dame Carol Black’s recommendations in her review of the health of the working age population. It’s a positive development and shows the Government’s commitment to helping the working population stay healthy, and an acknowledgment of the importance of screening to identify potential problems before they become a sick leave issue. However, we believe that one off screening is less effective than an ongoing health check provision, which allows people to engage in a process to change their behaviour and create the change which will ultimately make a positive impact on health and wellbeing. It’s good to know that any confusion regarding tax liability has been removed and employees can get fully involved with wellbeing at work programmes without fear of the tax man.”