Key Post How employer paid VHI works

Brendan Burgess

Brendan Burgess

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See http://www.revenue.ie/en/tax/it/leaf....html#section9


Example 1

The employer pays the full medical insurance premium for an employee

The renewal notice to the employer shows the net premium due - £1,600 (Gross Premium is £2,000)

Employer

The employer pays the insurance provider the net of tax relief premium of £1,600.

He/she pays the tax relief at source (£400) attributable to the premium to the Collector General.

The employer operates PAYE/PRSI on £2,000 notional pay to the employee.

Employee
As the employee has not benefited from the tax relief arising on the medical insurance premium paid by the employer, the employee is entitled to a tax credit of £400 (£2,000 at 20%) in his/her tax credit certificate.


What does the employee put on their tax return?

Benefit in Kind: €2,000
Tax credit claimed: €400
 
Hi ClubMan

Yes, it clarfies it further. The employee pays BIK on the gross premium and not on the net paid by the employee.

Medical Insurance Relief - Is it taxed at source and is the employee also entitled to a Tax Credit?

Where the employer pays the full premium for employees and the employee does not make good any amount to the employer, PAYE and PRSI must be applied to the gross (pre Tax Relief at Source) premium. To ensure that the employee is granted the relief afforded by TRS, the employee will be given a tax credit (at the standard rate) for the gross premium in his or her certificate of tax credits.
 
Just curious - my employer pays my VHI and my payslip shows the NET premium so that seems to be the figure on which tax and related deductions are calculated. Is this a mistake on my employer's part which means that my tax and related deductions are being understated?
 
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