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Section I of form P11D is used to report the provision of private medical treatment or insurance to obtain private medical treatment to an employee or to a member of the employee's family or household. Medical treatment covers "all procedures for diagnosing or treating any physical or mental illness, infirmity or defect". These definitions cover every stage of medical examinations and treatment, starting from the initial visit to a GP, dentist, optician or other medical practitioner.
Under the provisions of the Benefits Code, the cash equivalent of the provision of private medical treatment or insurance is the "cost of the benefit" less any part of that cost made good by the employee.
In the case of private medical treatment, records must be carefully kept of the costs incurred by the employer in paying
- fees charged by GPs, specialists, surgeons etc
- charges for medical and surgical procedures, in-patient or out-patient
- charges for hospital accommodation
- charges for nursing and convalescence
- charges for prescriptions and medical equipment and materials, and
- expenses claims and bills presented by employees to cover the above costs.
The total amount paid by the employer for any such treatment provided for an employee is the amount that must be reported on form P11D.
An alternative method of funding private medical treatment is for the employer to take out an insurance policy under which the employer is the insured person. When the policy pays out, the amount that is actually used to pay for the medical treatment is the amount that is to be reported - not the premiums paid by the employer under the policy.
Probably the most common method of providing medical treatment is through membership of a private medical insurance scheme such as BUPA and PPP. These schemes provide insurance under which the employer pays the premiums and the cost of the treatment is paid for by the insurance company on behalf of the employees. In this case, the expense to be reported is the amount paid by the employer in premiums or in any other way to provide the benefit that has been enjoyed by the employee during the tax year. If the employer meets the costs of any treatment that is not covered by the insurance policy, that must also be reported.
Where the employer pays monthly premiums for each employee, the total expense incurred for each employee should not be difficult to determine. However, difficulties arise where
- the monthly premiums under the policy do not relate to specific employees, e.g. a monthly premium of £;20,000 is paid to provide cover for an average of 500 employees, but the employees are not identified unless they make a claim
- the premiums are paid annually based on the number of eligible employees at the time, with the result that a full premium may be paid for an employee who leaves part way through the benefit year, and no premium may be paid for an employee who joins part way through the benefit year.
The cash equivalent of the benefit for any particular employee is the cost incurred to provide the benefit enjoyed in the tax year in question. When the cost was incurred is not important. If the employee has enjoyed the benefit for the full tax year, the amount reported is the expense incurred in providing the benefit for the full year. If an employee enjoys the benefit for only part of a year, the premiums should be apportioned appropriately. It does not matter that part of the premium to provide the benefit in the current year is paid in the previous or the next tax year.
It may be necessary, therefore, to apportion the premiums for two reasons:
- to split the premiums between the number of beneficiaries, and
- to reduce the premium where the benefit was provided for part of a year.
There are no statutory rules for apportioning the premiums. If the insurance policy clearly identifies the premium for each employee and the additional premiums for family members, those should be used. Otherwise, HMRC accepts any reasonable method of apportionment that is used by the employer and generally accepted by the employees. The same method of apportionment should be used each year.
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