Health screening tax exemption ends for many employees

The Government has made significant changes to the rules governing benefit-in-kind tax on health screening. As a result, the full check-ups frequently offered by employers to their most senior executives will, from 14 August 2007, be subject to tax in the same way as other benefits such as medical insurance.

What the new rules say is that an employer must provide screening or check-ups to all employees for tax exemption to continue. Most employers currently do not offer a benefit that can typically cost £400 to more than a few senior managers.

Simple as it may sound, the new rules do raise a number of questions. The most obvious route to avoid the tax, for instance, might be for an employer to provide a low-cost test such as a blood pressure check or a low cost paper based screen for all employees, but only the full screening to a select few. Even more simply, most employers offer eye tests to employees working with computers, so would the provision of these to everyone be sufficient to gain exemption for the more expensive screening?

As with any taxation issue, we have to advise you to contact your local tax office for specific guidance and we may all find that practical application of the rules will be different to what was expected. This said, we think that avoidance is not going to be easy! The new rules make a distinction between ‘health screening’ which is aimed at picking up particular problems in employees at risk, and ‘health check-ups’ that are intended to make a general assessment of an employee’s health. An employee can have one tax exemption per year for each of these two types. The further requirement, however, is that the ‘health screening’ benefit must be available to everyone at risk and ‘health check-ups’ to all employees.

As we see it, the normal full screening offered to senior employees is actually a ‘health check-up’ under this definition and would thus have to be provided to everyone to gain exemption. Screening for particular health issues, whether for high blood pressure or eye problems, would appear still to be exempt if offered only to a limited population, provided the employer can justify classing these employees as the only ones at risk.

Other questions that come to mind are whether tax exemption could remain if an employer offers the benefit to full-time employees only or to employees after a suitable probation period. Our view is, probably not, in both cases as the rules make reference just to ‘employees’ with no qualifications. 

THE INFORMATION CONTAINED IN THIS DOCUMENT IS OF A GENERAL NATURE ONLY AND SHOULD NOT BE RELIED UPON AS ADVICE IN ANY SPECIFIC SITUATION

For further information, please telephone your usual contact at Buck Consultants (Healthcare):

Tel: +44 (0)118 955 7700
Fax: +44 (0)118 955 7701
Email: healthcare@buckconsultants.com
Web: www.buckconsultants.co.uk
Abbot's House, Abbey Street, Reading, Berkshire, RG1 3BD, UK

Buck Consultants (Healthcare) Limited is authorised and regulated by the Financial Services Authority