When is a benefit in kind not a benefit in kind?

Oct24

Posted in Accountants

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Benefits in kind should be treated equally and should be taxed at the same rate. Those are the findings of a joint report by the Chartered Institute of Payroll Professionals (CIPP) and the Association of Accounting Technicians (AAT). But some benefits currently classified as benefits in kind shouldn’t be taxable at all, says the report. And topping the list for preferred declassification is healthcare.

Spreading the benefit

At first glance, healthcare may appear to fit the classic definition of a benefit in kind. It is a ‘perk’ received in addition to a salary, which directly benefits the recipient. Yet increasingly the case is being made that the individual is only one of the beneficiaries.

Helping employees return to work following sickness benefits businesses. They no longer need to pay sick pay, arrange cover and replace (or do without) the skills of the sick employee. The CIPP report also argues that contributing to the healthcare of employees reduces the burden on the NHS, reduces the welfare bill and benefits the economy.

The cost of sickness

An HRMagazine article citing a recent PwC report says the cost of sickness to UK employers is £29 billion a year. That equates to 9.1 sick days a year, almost double the rate in the US and four times the 2.2 days of Asia-Pacific workers.

The report states engagement, culture and workplace environment are the key influencers of such a marked difference between Western Europe (where levels are roughly comparable with the UK’s) and the rest of the world. The solution, says PwC consulting leader Jon Andrews, is to “address this cost by looking for ways to improve employees’ health, morale and motivation.” Taxing healthcare, it would seem, is not helping to close the gap between the UK and its neighbours; it may be exacerbating it.

Is health already a BIK?

Many employers are already taking significant steps within the workplace to improve health. The irony is that whilst individual healthcare is currently a taxable benefit in kind, many workplace schemes (which either primarily of implicitly support health) are not.

The subsidised healthy eating week in the canteen? Tax free. The in-house sports facilities or gym? Tax free. Cycle shelters and road safety equipment for cyclists? Tax free.

Have we reached a point where the distinction between healthcare for whole workforces and individuals seems artificial? Perhaps, as the CIPP/AAT report claims, the time has come to realise that the benefits of healthcare stretch much further than any one individual and their tax return.