Health insurance and Tax

W

Wexfordman

Registered User
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415
Hi,

Myself and some colleagues are debating tax etc on our company private health benefit and hopefully, someone close the argument for us.

If our health insurance is paid for us by our company, ie, bupa or vhi, it is subject to BIK, which effectively means that we pay full paye income tax etc on the vallue of the benefit.

The price of our health insurance is the same as if we werre to purchase externally, so our question is, is there any benefit to going through an employers scheme for this as opposed to taking the cashvalue and purchasing our own insurance ?

The cash value option to me seems better, as we would have more choice as to healt provider, but just want to be sure, I am not losing out tax wise. If someone could advise it would be appreciated.

Thanks,
Wexfordman
 
wrong. Lets take an example.
The cost of the insurance is 100 euro gross.

The man in the street would have to get 80 euro in his pay packet to pay for this as he gets the price with tax relief of 20%.

now, the company pay 100 euro for you, as they must pay the gross amount(well they should be), so you (assuming you are paying 42% tax, and are class A PRSI, 6%) have to pay 42 euro and 6 euro in BIK for this.

But you have still gained. Its cost you 48 euro, whereas the man in the street is paying 80 euro.

In addition to this, you are entitled to tax relief on the 100 euro but you have to apply for this yourself directly to revenue and it goes on your tax certs as a credit/extra standard rate allowance. So you get an extra tax benefit of 20 euro for the 100 paid out.

So this means that in reality you are paying 28 euro (the 48 BIK - the 20 tax benefit) for the health insurance, whereas the a guy who pays it himself is paying 80.
 
But the company will give me my 100 euro instead of paying for my VHI!!!

If this is the case, I get 52 euro from the company (100 euro after tax), which I pay to the health insurer, plus 28 euro to give me the 80 euro i need to pay the insurer (100 euro minus the 20% relief).

The cost is the same is it not, but with the cash option I can go to VIVAS for example ?

Regards,
Wexfordman
 
It would be more cost effective (due to tax relief) for both the employer and employee if they paid/remitted your health insurance premiums directly - both of you get relief even if you will face BIK tax/PRSI (as will be the case anyway).
 
Thanks for the replies so far guys. This still has me flumoxed though!! What reliefs would be availalable to me if my employer pays as opposed to me paying myself Clubman ? Sorry if I am missing the obvious!!
Thanks,
Wexfordman
 
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