If you are paying medical insurance premiums on behalf of your employees, it is important to be aware of the Benefit-in-Kind implications, explains Nikki Johns
When an employer pays a medical insurance premium on behalf of an employee, this is treated as a taxable Benefit-in-Kind (BIK) which means that the employee must pay PAYE, PRSI, and USC on the gross value of the premium. These taxes are deducted through payroll.
From the employer’s perspective, the operation of BIK on medical insurance premiums is complicated by Medical Insurance Relief being applied at source by the insurer.
Briefly, the procedure is:-
- The insurer reduces the gross premium by applying the medical insurance tax relief
- You, the employer, pay the reduced premium to the insurer
- The gross premium must be added as notional pay to your employee’s payroll for deduction
of PAYE, PRSI, and USC
- Your employee must claim the medical insurance tax relief directly using the Revenue MyAccount facility
- You, the employer, must return to Revenue the value of the Medical Insurance Relief
The following example is provided on the Revenue website:
At the time of writing, due to the Covid-19 Pandemic, refunds are being issued by medical insurance providers. For information on how to deal with this, as well as an overview of other changes relating to Covid-19 is available is on the Revenue website.
We understand that operating payroll and dealing with the various changes that have taken place this year in response to the Covid-19 pandemic is proving difficult for some employers. If you need assistance, our team would be pleased to help. You can find information about the supports we offer on our payroll services page or contact our CEO Sarah Daly for further details.