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Occupational Health: Taxation

Question for Treasury

UIN 281712, tabled on 24 July 2019

To ask the Chancellor of the Exchequer, what assessment he has made of the implications for his policies on (a) health prevention and (b) early intervention of the (a) conditions in relation to 28 day consecutive absence and (b)requirement that a health condition must be a direct result of work in the exemption for employer-funded recommended medical treatment under section 320C of the Income Tax (Earnings and Pensions) Act 2003.

Answered on

9 September 2019

The Government recognises the valuable work of employers such as the John Lewis Partnership in providing for the health of their staff.

Employers have a critical role to play in helping disabled people and people with long-term health conditions to remain in work. Keeping more people in work is good for them. But it is good for the economy too, and it reduces spending on out-of-work benefits, and potentially also demand on the NHS. For employers, investing in employee health and wellbeing can lead to increased workforce productivity and help retain key talent in an organisation.

Employers normally incur expenditure on employee healthcare for a business purpose and can already deduct this in full when calculating their taxable profits under the longstanding general rules for business expenses. This means employers already receive full tax relief for these costs. The Government therefore does not believe that the existing tax system for business expenses incurred by employers provides a barrier to those wishing to support employees at work.

The tax system also ensures employees do not pay income tax or National Insurance Contributions (NICs) on several employer-provided, health-related benefits and there is no corresponding Class 1A NICs liability for employers when there is an exemption for income tax. This includes recommended medical treatment of up to £500 intended to help employees return to work.

This particular exemption is targeted at supporting individuals who are expected to reach or who have already reached four weeks of sickness absence. This is because evidence suggests there is an increased likelihood of employees moving on to benefits after an absence lasting four weeks or longer. The £500 cap is in line with the estimated annual cost of the medical treatment that would typically be recommended to help employees return to work.

In July, the Government launched a consultation on measures to reduce ill health-related job loss. The broad focus of this consultation chimes with recommendations in the John Lewis report, including potential financial incentives to encourage more employers to access occupational health services, driving early and supportive employer action and spreading best practice. However, it also notes that there is limited evidence that making the tax treatment more generous is the most effective lever to incentivise more employers to start offering occupational health provision, if the initial cost is the main barrier for them.

The Government will use the evidence and views gathered during this consultation to develop its proposals further, considering an approach which offers the best value for money and is affordable in the context of the next Spending Review.

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