What is the tax exemption for employer-funded medical treatment?

From 1 January 2015, employer-funded medical treatment that is recommended by the Fit for Work service, or by the employer's own occupational health service, to help an employee return to work is exempt from income tax and national insurance contributions, up to the value of £500 per employee per tax year.

The treatment must be to enable an employee to return to work after illness or injury, where he or she has been absent for at least 28 consecutive days or where he or she has been assessed by a healthcare professional as not fit for work, or possibly fit for work if certain steps are taken, for at least 28 consecutive days.

The person making the recommendation must be:

  • a registered medical practitioner;
  • a registered nurse; or
  • an occupational therapist, physiotherapist or psychologist registered with a relevant regulatory body.

The recommendation must be provided in writing to the employer and employee and must specify the medical treatment that is recommended.

The exemption from tax and national insurance does not apply if the employer-funded medical treatment is provided under a salary-sacrifice scheme or a relevant flexible remuneration arrangement where it is agreed that the treatment will be provided rather than the employee receiving some other form of employment income (defined in s.7 of the Income Tax (Earnings and Pensions) Act 2003).