112AA Taxation of certain perquisites: employees of authorised insurers and tied health insurance agents

Summary

This section provides that where an employee of a medical insurer (or of a tied health insurance agent) receives a medical insurance policy in the course of their employment, any discount received on the policy shall be a taxable emolument for the employee.

Where a family member of an employee receives a free or discounted policy by way of their connection to the employee, the value of any discount received shall also be a taxable emolument for the employee.

The emolument is calculated by reference to the market value of the insurance policy inclusive of any tax relief at source (TRS) that would have been available had they paid for the policy personally.

Medical insurance relief rules will apply to affected employees in a manner that ensures the same relief is available to an employee where their employer provides medical insurance, regardless of whether they work for an insurance company or any other industry i.e. an employee is chargeable to income tax at his/her marginal rate on the value of the gross premium (as a taxable perquisite) but is given a credit for tax relief, at the standard rate, in respect of that premium in the calculation of the tax chargeable on that perquisite.

Details

Definitions

(1) “authorised insurer” has the same meaning as section 470;

“employee” includes an office holder and any person who is an employee within the meaning of section 983;

“emoluments” has the meaning assigned to it by section 983;

“relevant contract” means a contract of insurance for health expenses or dental expenses other than expenses in respect of routine dental treatment;

“relevant contract price” is the amount that would be payable, by an individual who is neither a relevant employee nor connected with a relevant employee for a similar insurance policy, inclusive of any Medical Insurance relief (generally granted by way of tax relief at source) that would generally be available

“relevant employee” means an employee of an authorised insurer, a tied health insurance agent or any person connected with such employers;

“tied health insurance agent” means any person who, directly or indirectly, enters into an agreement or arrangement with an authorised insurer—

1. whereby that person undertakes to refer all proposals of insurance, made under a relevant contract, to that authorised insurer, or
2. which restricts in any way that person’s freedom to refer proposals of insurance, made under a relevant contract, to an authorised insurer other than the authorised insurer with whom an arrangement was made.

Application of section

(2) This section applies where:

• employees of medical insurers (or of tied health insurance agents) receive medical insurance in the course of their employment, or
• family members of employees of medical insurers receive medical insurance by way of their connection to the employee

Charge on employer

(3) Where this section applies to an insurance policy:

1. The difference between
• the relevant contract price, and
• the sum of any amount paid by the employee and/or connected person for the policy

shall be a taxable emolument for the employee.

2. the general benefit-in kind provisions of the TCA will not apply (Chapter 3 of Part 5) to any expense incurred by the employer in providing the insurance policy, and
3. the general provisions for the taxation of insurance as a benefit-in-kind (s112A TCA 1997) will not apply to the provision of the policy.

Application of Medical Insurance Relief

(4) Where a an employee of a medical insurer, a tied health insurance agent or a party connected to either a medical insurer or a tied health insurance agent (or a person connected to that employee) receives a free insurance policy in the course of the employment of the employee, section 470(3) shall not apply to this policy.

Section 470(3) relates to tax relief at source. This section has been dis-applied as:

1. No payment is made by the employer or the employee for the insurance,
2. As a result, no party is able to deduct and retain the relievable amount when paying for insurance.

Instead, any emoluments for the purposes of section 112AA shall be deemed to be a payment made by the employee to which section 470(2) applies directly (notwithstanding that the deemed payment was made after the TRS provisions were introduced). This enables the employee to claim a credit equal to the relievable amount (20% of the policy value up to the first €1,000 for adults and €500 for children) where they receive an insurance policy for free, which is in line with the treatment of employees in other industries.

(5) Where an employee of a medical insurer, a tied health insurance agent or a party connected to either a medical insurer or a tied health insurance agent (or a person connected to that employee) (or a connected person) makes a payment towards the cost of their insurance, section 112AA(5) operates to ensure the manner in which Medical Insurance relief is granted (20% of the policy value up to the first €1,000 for adults and €500 for children) is apportioned based on the amount actually paid by the employee or the connected person. This is in keeping with the treatment of employees in other industries in receipt of a medical insurance policy.

Relevant Date: Finance Act 2021