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Posted Tue, 29 Aug 2023 15:21:44 GMT by FDJ
I've been trying to find out what the tax treatment is on benefits covered by the employer while on leave, but no luck as yet. When an employee is in active employment and opts for a health insurance benefit level higher than the one offered by the employer, the cost is deducted from payroll as a net deduction as a form of repayment for the upfront extra cost the employer has covered on behalf of the employee. When the employee is on unpaid Maternity or Sick leave the employer covers the cost during unpaid statutory leave. Do these covered costs of the benefits then become benefits-in-kind and therefore subject to Tax and Class 1a NICs under the P11D? Or would they be tax free as it's a cover during a sickness or maternity absence? Is there a limit to which they are non taxable? Thanks :)
Posted Fri, 01 Sep 2023 09:30:14 GMT by HMRC Admin 20

Where an employee receives a taxable benefit in kind, and this is provided through a salary sacrifice agreement, you need to consider the legal postion.  There is a legal case (Peninsula) which deals with salary sacrifice and unpaid family leave, but this specifically concerns Child Care Vouchers.  You may want to speak to ACAS on 03001231100.  
In respect of dealing with the net pay contributions, this will depend on the contractual arrangment concerning those contributions.

When reporting benefits in kind, you always report the cost to the employer.  You must do this.  However, the net pay contributions would be reported as an amount made good or from which tax deducted.  This reduces the value of the benefit.  This is the amount the employee pays on and which the employer pays Class 1A NIC.

Thank you.

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