HMRC published the formal response to the above consultation this week. So what new light does this provide on this particular topic, and the wider progress of the Sickness Absence Review (SAR)?
Before proceeding further, it’s probably worth clarifying that reference below will be made to the Health and Work Service (HWS). This “brand” name replaces the more familiar working name of the Independent Assessment Service (IAS). I will be using HWS on this blog and in our events from now on to avoid confusion.
So let’s return to the Consultation outcomes.
Firstly, and as mentioned by The Chancellor last week, we already knew that as a direct result of the consultation process the Government has decided that the exemption will be made available on medical treatments recommended by any employer-arranged occupational health service as well as by the Health and Work Service (HWS). This is important, as there was genuine concern that employers with more advanced health and wellbeing strategies would otherwise have found themselves at a disadvantage to those using the Government funded HWS service. I applaud this decision by HMRC.
But there is quite a lot of other useful information there as well.
1) Let’s start with the actual relief being offered. The response confirms that the relief will be implemented as a tax exemption, and exempt up to £500 per employee per year paid by employers for recommended medical interventions from income tax and National Insurance contributions (NICs). Importantly, employers will not need to go through a formal process to claim this exemption, and will not need to inform HMRC about funding for treatments covered by the £500 per employee per year limit.
2) Another key point is that The Government has also decided that the tax exemption will be given at an employee’s marginal rate. This means that the £500 exemption will be available to all employees irrespective of their income. This was an area of some concern from the initial recommendation made by the SAR (which suggested that any relief be targeted at Basic Rate tax payers only) – and a definite win for the pragmatists who wanted to keep this concept both simple and universal.
3) On a less positive note, it is clear that HMRC are completely committed to the exemption only being available when an employee has been absent for a qualifying period. The period is currently specified as four weeks. However, and if my reading of this is correct, the exemption seems likely to apply where the absence is expected to exceed four weeks (presumably as decided by the HWS and/or the employee’s GP).
4) In terms of the level of the exemption, some will recall that at recent events I have questioned whether £500 is a high enough level to make a difference. HMRC and DWP are sticking to their guns here, and have cited DWP’s estimate that the average cost of interventions is £150 – £250 per individual. The HMRC also mentioned that one Occupational Health provider who had responded to the consultation supported this assertion. So £500 it is – and let’s not be churlish – this is a huge step forward in itself.
5) Finally, and not least, when will this exemption actually begin? Originally intended to start in April 2014 – it now appears that this has slipped a little and is now “likely to be autumn 2014″. This is slightly disappointing, but perhaps understandable given the delays in commencing the HWS.
That’s probably enough info for one post, but I will return to this subject again with some more information in January.
And before I finish this post I would just like to thank you, our seminar delegates and followers, for your input into the above debate. The HMRC consultation specifically states:
“One respondent cited survey evidence indicating that tax incentives were the favoured solution for employers to encourage new health and wellbeing initiatives in the workplace.”
The above refers to the survey evidence that you kindly assisted with at our Jelf Employment Seminars in London. So evidence that your views do make a difference, and can help shape legislation. Thanks again for your support in this initiative.