Changes to Medical Insurance Relief include a limit on the tax relief granted on medical insurance premiums, employees claiming relief due on their Tax Credit Certificate (TCC), and employer’s payment of tax relief amounts to the Collector-General.
Limit on the tax relief granted
For insurance policies taken out or renewed after October 15, 2013, the tax relief on medical insurance premiums is capped at €1,000 per adult and €500 per child. Relief continues to be granted at 20%. A child for these purposes includes a student over 18 years and under 23 years who is in full-time education. Prior to the change, tax relief was available on the full gross premium paid at a rate of 20% for all qualifying medical insurance premiums.
Tax relief on private health insurance premiums
Where an individual employee pays medical insurance premiums directly to the medical insurer, they may get a tax credit. This tax credit is granted directly by the insurance company. The premium will be reduced by the amount of the tax credit. This is known as Tax Relief at Source (TRS). This tax relief is at 20% but capped at €1,000 per adult and €500 per child.
An example of when an individual pays 100%:
Gross Premium €1,500
Amount on which TRS is calculated €1,000
TRS (€1000*20%) €200
Reduced premium payable to insurer €1,300
Tax relief on employer paid health insurance premiums
Where an employer pays the medical insurance premiums on behalf of an employee, the Tax Relief at Source (TRS) system does not apply. The employer must pay the tax relief amount of the policy to the Collector-General.
An example of when an employer pays 100%:
Gross Premium €1,500
Tax relief related to employer share (€1000*20%) €200
Net payment made by the employer to the insurer €1,300
Employer pays to the Collector General €200
In these circumstances a Benefit in Kind charge will arise on the gross premium and be subject to PAYE, PRSI and USC. Since the employee has not benefited from the TRS system they will instead be entitled to the tax credit in their Tax Credit Certificate (TCC). Therefore, it is necessary to calculate the amount of relief the employee is entitled to and make the claim to the Revenue Office. The employee’s medical insurance eligibility for tax relief will be stated on the P35 return. If a medical insurance policy was entered into or renewed on or before 15th October 2013 and falls for renewal in 2014, a mixture of the old and new relief will be done.