Medical Insurance Premiums - Tax Relief
MEDICAL INSURANCE PREMIUMS
When an individual takes out medical insurance cover with an approved private health insurance scheme, they may be entitled to a tax credit on the premium. This tax credit is generally granted directly by the insurance company. Normally, the insurance provider is approved by Revenue to grant Tax Relief at Source (TRS), i.e. the insurance provider administers the tax credit. The insurance provider will apply the tax credit as a reduction to the premium.
LEVEL OF TAX RELIEF
Tax relief is not granted on the entire premium paid, limitations apply as follows;
Medical Insurance Premiums: Limit on relief
Your premium will be reduced by the amount of the tax credit so you will probably not even notice that you have got a tax credit. As explained above, this is known as Tax Relief at Source (TRS).
EMPLOYER PAID MEDICAL INSURANCE PREMIUMS
Where an employer pays the medical insurance premiums on behalf of an employee, TRS does not apply. The employee must make a claim directly to Revenue for the tax credit on the insurance premium paid on their behalf, by the employer. Revenue will issue the tax credit through an adjustment to the employee’s tax credit certificate.
There are a number of varying scenarios as to how tax relief is issued to an employee depending on;
- Personal circumstance limiting the tax relief
- Employer pays the entire insurance premium
- Employee makes a contribution towards the insurance premium
Medical Insurance Premiums: Employer paying 100% of premium
Medical Insurance Premium: Employee contributing to the insurance premium
P35 AND TRS ON MEDICAL INSURANCE PREMIUMS
Revenue requires that employers itemize medical insurance premiums by employee for whom;
- the medical insurance premium is paid by the employer
- and where this medical insurance premium had been treated as a benefit in kind and taxed accordingly
For more information in relation to entering medical insurance premiums as a Benefit in Kind at employee level refer to article Medical Insurance.
Additional reporting requirements specify that for each medical insurance premium the amount of that medical insurance premium which is eligible for tax relief must be itemised by employee also.
In order to comply with these reporting requirements employers must enter the amount of the medical insurance premium which is eligible for Tax Relief by employee.
To report TRS on Medical Insurance Premiums
- Open the Company within CollSoft Payroll.
- Choose to Edit the Company Settings
- Choose the BIK option
- Ensure that the Benefit allocated to be used for the recording of Medical Insurance premiums is indicated as Medical Insurance
P35 Medical Insurance - flag the benefit as medical insurance
Enter Premium value eligible for TRS by employee
- Choose the relevant employee record for whom medical insurance has been processed as a BIK
- Select the BIK option
- Enter the amount of the medical insurance premium paid that is eligible for tax relief. This cannot exceed the total premium value.
P35 Medical Insurance - amount eligible for TRS
- CollSoft Payroll will automatically calculate the tax relief based on the eligible amount entered, i.e. applying 20%
P35 Medical Insurance - automated TRS calculation
- Repeat this process for each employee for whom Medical Insurance has been included as a BIK item within the tax year.
Note: while an individual may be entitled to tax relief up to a €1,000, the amount eligible cannot exceed the premium amount. If you enter an eligible amount which is greater than the premium amount ROS will reject the P35 submission.