Consultation outcome

Implementation of a tax exemption for employer expenditure on health-related interventions recommended by the new health and work assessment and advisory service

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

This consultation has concluded

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Detail of outcome

The Treasury received responses from a wide range of stakeholders to this consultation. This document details the summary of responses. As announced at Autumn Statement 2013, the government has decided to extend the exemption to medical treatments recommended by employer-arranged occupational health services in addition to those recommended by the new Health and Work Service.

Original consultation


Informal consultation on the implementation of a tax exemption for employer expenditure on health-related interventions

This consultation ran from

Consultation description

On 20 March 2013 the Chancellor of the Exchequer announced that employers that help their employees to return to work after periods of sickness will get new support through the tax system.

This announcement followed the DWP and BIS commissioned report “Health at work – an independent review of sickness absence” by Dame Carol Black and David Frost CBE, which was published in November 2011. The report’s headline recommendation was the creation of a health and work assessment and advisory service that will conduct a health assessment when an individual has been on sick leave for four weeks, and provide advice on how they can return to work. The government has accepted this recommendation and the new service will commence during 2014.

The report also recommended that expenditure by employers on medical treatment and vocational rehabilitation targeted at keeping sick employees in work, or speeding their return to work, should attract tax relief. The government felt that a general tax relief for medical expenditure would be too broad and intends to introduce a new targeted tax exemption to apply where the new service recommends health-related interventions to help an employee return to work. Where an employer funds such interventions, the expenditure, up to a cap of £500, will be exempt from income tax and National Insurance Contributions (NICs).

The £500 cap will apply per employee over a complete tax year. It will be valid for more than one health-related intervention recommended by the new service, subject to the overall annual limit.

The exemption will be limited to treatment and therapies recommended by the new service. It will not apply to employer expenditure on specialist equipment, workplace adjustments, travel expenses, or recommended interventions that do not rank as medical treatment or therapy. There are existing tax exemptions, such as for employer-funded welfare counselling, that may apply to other steps taken to support employees in returning to work.

The government wants to make the exemption simple to administer, to encourage employers to engage with the well-being of their employees and fund treatment to help them return to work after a period of ill-health. It is therefore intended that where a health-related intervention is recommended by the new service and the employer meets the cost, relief will be due for any method of payment. This will include where the employer pays a third party provider directly for treatment arranged by an employee, arranges and pays for treatment on behalf of an employee, or reimburses an employee.

Any expenditure over the £500 cap will, as now, be classed as payment of earnings or a benefit-in-kind, depending on the type of expenditure, and will be subject to the appropriate deduction of income tax or reporting on form P11D, and either Class 1 or Class 1A NICs.

The current rules, such as the wholly and exclusively requirement for treating employer expenditure on employee health care as a deduction when calculating taxable profits, are not affected by the cap.

The consultation

The consultation seeks views from interested parties on the implementation of the new exemption. In particular, responses to the specific questions below would be welcomed:

Administrative burdens

Will the new exemption have an impact on employer administrative burdens, either negative or positive? Can you provide any evidence to support your view?

Availability of the exemption

Will the new exemption encourage employers to pay for recommended health interventions for:

  • all employees
  • selected employees only
  • no employees

Are there any factors that would affect employer decisions about the categories of employees for which they would fund the recommended treatment?

What would the impact be if the new exemption were conditional on employers providing a similar level of funding for recommended interventions for all employees?

Funding interventions

Where employers intend to fund recommended health interventions, would they completely fund the intervention themselves without seeking any contribution from employees?

If employers were considering seeking any contributions from employees, what form would this take?

Cost of interventions

DWP have estimated the average cost of interventions as £150-£250 per individual, so the £500 cap will cover most recommended interventions. Do you think that the estimated cost is valid and that the level of the cap is set correctly?

If you think the cap should be set at a different level, can you provide any evidence to support your views?


Are there any other issues that you think need to be taken into consideration in implementing this new exemption?

Next steps

The government will consider meeting interested parties to discuss the issues raised in this consultation. The timing, format and venue for these meetings will be decided in due course. If you are interested in attending, please contact us at the e-mail/postal address.

The government will publish a summary of the responses to this consultation in the autumn. Responses will inform the draft legislation which will be published for further consultation before Budget 2014.

Published 21 June 2013
Last updated 10 December 2013 + show all updates
  1. Summary of responses published 10/12/2013
  2. First published.