Thousands of employees with health insurance missing out on tax relief
Published 26/10/2015 | 02:30
Thousands of people who have health insurance paid for by their employers are missing out on tax relief.
They don't realise that they have to claim the tax relief themselves, says Dermot Goode, of Totalhealthcover.ie.
It is estimated that around 400,000 people have health insurance that is either fully or partially paid for by their employer.
Mr Goode said the majority of these people are not aware that they are due a tax benefit.
"The people who run 90pc of the schemes that I talk to are not aware of this," he said.
People who take out health insurance individually get tax relief on the premium automatically. But the system is operated differently if an employer pays all or part of the health insurance premium.
"In company group schemes where the employer pays the premium for employees as a company perk, the TRS (tax relief at source) system doesn't apply."
Employees will be charged benefit-in-kind (BIK), pay-related social insurance (PRSI) and universal social insurance (USC) on the gross value of the cover paid for them. But they will not get their tax relief at source.
"Most mistakenly believe that this tax relief still applies, or that their employer claims this relief for them, which is not the case in the majority of companies," Mr Goode explained.
He said people entitled to this tax relief must include this claim in their annual tax return to the Revenue Commissioners.
They will need to notify Revenue of the gross premium paid on their behalf by their employer on which they have been charged BIK. Revenue will then make arrangements to pass on their tax relief entitlement to them, Mr Goode said.
Similar to claiming relief on medical expenses, taxpayers can go back four years if they are in receipt of this company benefit for some time and haven't claimed previously.
Take, for example, an employee whose employer has fully covered their family healthcare, costing on average €3,000 a year, for the past four years. That's a cumulative figure of €12,000 on which the worker has been charged BIK.
"If they haven't claimed tax relief, they could be entitled to a refund in the region of €2,400, assuming they're on the top tax rate," Mr Goode said.
It's estimated that 50pc of all people with health insurance are in group schemes.
Almost 40pc of those in such schemes, or 400,000 people, receive a subsidy from their employer towards the cost.