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HMRC internal manual

Employment Income Manual

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HM Revenue & Customs
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Particular benefits: recommended medical treatment to help an employee return to work

Section 320C ITEPA 2003

Expenditure by employers on medical treatment for employees is generally chargeable to income tax either as a payment of earnings under section 62 ITEPA 2003 or as a taxable benefit under Chapter 10 of Part 3 of that Act.

From 1 January 2015, an exemption from income tax applies where an employer funds recommended medical treatment where the recommendation itself meets specific requirements set out in section 320C ITEPA 2003 and regulations made under that section.

This means that expenses incurred by an employer to cover medical treatment which is recommended to an employee for the purposes of assisting the employee to return to work after a period of absence due to injury or ill health should not be treated as conferring a chargeable benefit on the employee. The exemption applies to expenditure up to a cap of £500 per tax year per employee.

Position from 1 January 2015

From this date, the exemption described above applies to the provision of recommended medical treatment or the payment or reimbursement of the costs of recommended medical treatment provided certain conditions are satisfied.

The conditions that have to be satisfied for the exemption to apply are that:

  1. before the recommendation for medical treatment has been made the employee must have been either:
* assessed as unfit for work due to injury or ill health for at least 28 consecutive days by a health care professional (see EIM21775) (i.e. the health care professional expects that, without medical treatment, the employee will be unfit for work for at least four weeks); or
* absent from work due to injury or ill health for at least 28 consecutive days.
  1. the recommendation is made to the employee by a health care professional (see EIM21776) as part of occupational health services provided to the employee:
* under section 2 of the Employment and Training Act 1973 (see EIM21776); or
* by, or in accordance with, arrangements made by the employer;
  1. the recommendation is provided for the purposes of assisting the employee to return to work;
  2. the recommendation :
* is in writing,
* is provided to the employer and employee, and
* specifies the medical treatment that is recommended.

The exemption applies to medical treatment up to a maximum cost of £500 in the tax year per employee. Any costs in excess of this amount are subject to tax in the normal way for medical treatment.

An assessment that an employee is unfit for work includes an assessment that they may be fit for work subject to the employer making arrangements to enable them to return, providing that the employee does not return to work before a recommendation for medical treatment is made.

The exemption does not apply if the medical treatment is provided under salary sacrifice arrangements.