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Finance Act 2014

Section 12: Recommended Medical Treatment


1.This section provides for a new exemption from income tax where an employer meets the cost of recommended medical treatment provided to an employee to assist them to return to work after a period of absence due to ill-health or injury, subject to an annual cap of £500.

Details of the Section

2.Subsection 1 amends Part 4 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA) (exemptions).

3.Subsection 2 inserts new section 320C into Chapter 11 (miscellaneous exemptions).

4.New subsection 320C(1) provides that no liability to income tax arises where an employer either provides recommended medical treatment to an employee or pays or reimburses the costs of such treatment as long as the provision, payment or reimbursement is not subject to salary sacrifice or flexible remuneration arrangements.

5.New subsection 320C(2) limits the value of the exemption in a tax year to £500.

6.New subsection 320C(3) sets out at paragraphs (a) (b) and (c) the cumulative conditions under which medical treatment provided to the employee is “recommended”. Paragraph (a) provides that a recommendation is made to an employee as part of occupational health services provided to the employee by a service provided under s2 of the Employment and Training Act 1973, or by, or in accordance with arrangements made by, the employer. Paragraph (b) provides that treatment is for the purpose of assisting an employee to return to work after an absence due to injury or ill health, and paragraph (c) provides the Treasury with a power to set out other requirements in regulations.

7.New subsection 320C(4) provides at paragraphs (a) and (b) that regulations under new subsection 320C(3)(c) may specify that the recommendation must be given after the employee has been assessed as unfit for work for at least a minimum number of consecutive days, and in a manner, and by a person, specified in regulations.

8.New subsection 320C(5) provides the Treasury with a power to amend new subsection 320C(3)(a) to add, amend or remove a reference to any enactment.

9.New subsection 320C(6) clarifies that the value of the exemption in a tax year is an amount equal to the sum of all payments that are classed as earnings under section 62 ITEPA and all benefits that are treated as earnings under the benefits code that would be exempt from liability to income tax under new subsection 320C(1) if the £500 limit at new subsection 320C(2) did not apply.

10.New subsection 320C(7) provides definitions of terms used within new section 320C.

11.Subsection (3) amends section 266 ITEPA by adding to the list of non-cash vouchers that do not give rise to tax liability under Chapter 4 of Part 3 of ITEPA a new paragraph (f) covering medical treatment that meets the requirements of new section 320C. The effect of this is to remove the tax charge that would otherwise arise when the employer arranges for the provision of this form of medical treatment by means of non-cash vouchers.

12.Subsection (4) provides that these amendments will have effect in accordance with a Treasury Order.

13.Subsection (5) disapplies the effect of section 1014(4) of the Income Tax Act 2007 in relation to an order made under subsection (4).

Background Note

14.Under current legislation an employer who arranges and pays for medical treatment for an employee is generally providing a benefit in kind that is treated as earnings and is liable to income tax. Where an employer either pays for medical treatment arranged by an employee or reimburses an employee for the costs of such treatment, this constitutes a payment of earnings and is also subject to income tax.

15.This legislation will provide an exemption from a charge to income tax for any payment by an employer to meet the costs of medical treatment that has been recommended by occupational health services up to a limit of £500 per employee per year. This will support the Government’s aim to widen access to occupational health treatment and to encourage employers to engage with the wellbeing of their employees.

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