Tax implication of
Employee suffering from headache

Do you have a desk job in an office and do you suffer with headaches? Do you not know what is causing those headaches? If your employer pays for you to have a private medical check-up to see what is causing those headaches, is this a benefit in kind (BIK)?

Section 320B of ITEPA 2003 provides an exemption for one health-screening assessment and one medical check-up in a tax year. These terms are defined as follows:

320B(3) In this section–
“health-screening assessment” means an assessment to identify employees who might be at particular risk of ill-health, and
“medical check-up” means a physical examination of the employee by a health professional for (and only for) determining the employee’s state of health.

At EIM21765, HMRC state:

Medical checks that are connected to the provision of medical treatment are not covered by the terms of the exemption.

The medical check-up would be within the scope of the exemption if it all it is aiming to do is to check the employee ‘s state of health providing, per HMRC, it is not connected to medical treatment. The legislation does not mention diagnosis of existing ill health as being within the exemption.

There is a separate exemption in section 320C ITEPA 2003 for medical treatment of up to £500 to enable an absent employee to return to work. Note that medical treatment here specifically includes diagnosis as well as the actual treatment and so it appears from this definition that HMRC differentiates medical treatment from health-screening or check-up. See EIM21776.

In the circumstances they have described, the employee already feels that something isn’t right. The employee is already suffering with headaches, and they don’t know what is causing those headaches. So, if their client pays for the employee to have a private medical check up to see what is causing those headaches, I consider this would be a benefit in kind (BIK).

The tax and NIC treatment would depend on who enters into the contract and whether the employer paid it direct to the provider or reimbursed the employee.

If the contract was in the employer’s name and the employer paid it direct to the provider, you should include the amount paid on forms P11D and P11D(b) as BIK for tax and Class 1A NIC purposes. Include on P11D in the bottom box at Section M ‘other items (including subscriptions and professional fees)’. The employee would pay the P11D tax due, the employer would pay the Class 1A NIC due.

If the contract was in the employee’s personal name and the employer paid it direct to the provider or reimbursed the employee, this would be a pecuniary liability – meeting the employees debt.

Payments made direct from the employer to the provider should be included on form P11D as BIK for tax purposes only. Include on P11D at section B – ‘payments made on behalf of employee’. Do not include on form P11D(b) as no Class 1A NIC is due. Include in the payroll in gross pay for Class 1 NIC purposes only (employee and employer Class 1 NIC)
If the employee pays the bill and the employer reimburses this to the employee, include the amount reimbursed in the payroll in gross pay for PAYE tax and Class 1 NIC (employee and employer). No form P11D required. Do not include on form P11D(b) as no Class 1A NIC due.
The employer could gross up the amount in the payroll, if they want the employee to come out with a specific amount after PAYE tax and Class 1 NIC.

https://www.gov.uk/expenses-and-benefits-personal-bills/what-to-report-and-pay
The pecuniary liability principle is detailed at:
https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim00580