The Government may owe as much as €61 million in unclaimed refunds to members of corporate private health insurance schemes.

According to our calculations based on our market knowledge and all available information to us, an estimated 300,000 employees in corporate schemes may not realise they are entitled to a refund of a proportion of the tax on the health perk taken out of their salary by Revenue.

We estimate that around 90 to 95 percent of employees who are on company-paid private health schemes do not reclaim their tax releif on health insurance either because they are unaware of the entitlement or feel that the amount is too low to go through the process of a tax return.

However, following what happened in the budget on Tuesday, we would urge people to take a good look at the refunds they are entitled to if they haven’t done so already.’

While tax relief on premiums for policies taken out by individuals has always been applied automatically, tax relief on corporate-run schemes is not granted as source and requires the employee to reclaim it directly from revenue.

From the figures available to us and our market expertse we have worked out the following

The average premium paid in 2012 was €838 Net or €1,048 Gross. ¹

The total population insured for Private Health Insurance up to June 2013 was 2.05 Million. ² Of this population approximately 15% of them or 307,500 are corporate lives (individuals whose premiums are paid by their employer).³

If we assume an average gross premium of €1,048 x 307,500 we get a total corporate annual premium of €322,260,000.

When an employer pays for the health insurance premium of an employee, the employee is liable for (BIK) or Benefit In Kind tax. This BIK is calculated based on the employee’s marginal rate of tax and is calculated on the gross premium. The reason the BIK is calculated on the gross premium is due to the fact that the employer (who is paying the premium) cannot claim the individual’s tax relief entitlement for Private Health Insurance.

Just over 17% of the work force is liable to pay tax at the higher rate of 41%.  Therefore it is reasonable to assume that 25% of those with employer paid Private Health Insurance are on the higher tax rate.

With 75% of these employees on a lower tax bracket (of 20%) and 25% are on the higher tax bracket (41%) we can calculate that:

• those on the lower tax rate have a BIK liability of €48,339,000
• those on the higher tax rate have a BIK liability of €33,031,650

Therefore the total BIK paid by employees whose employers pay for their Private Health Insurance comes to €81,370,650.

While an employer cannot claim tax relief on behalf of its employees, the individual employee is entitled to claim their 20% tax relief on Private Medical Insurance against their BIK liability.

The total tax relief claimable from the BIK paid amounts to €16,274,130.

Most individual PAYE employees to do not complete tax returns and hence will not be reclaiming this benefit. Some of the very large employers will make efforts to ensure that their employees are getting this back their tax credit, but this probably only represents 5% of this figure.

This means that there could be in the region of €15,460,423.00 in unclaimed medical Insurance tax Relief.

Now consider that this credit can be claimed for a period of 4 years and this brings the total unclaimed amount to 61,841,692.

For those who feel poorly treated as a result of the new budgetary measure and by the disgracefully misleading way in which it was introduced, I would suggest that a very effective way to make those feelings heard is by ensuring you are reclaiming these benefits back if your employers either pays or partially contributes to your private health insurance.

Also bring this article to the attention of your employer and if they are not already aware of this we can help them ensure that you are getting this benefit back by way of tax credits.

The form that allows employees to claim this relief is called an IT5 Medical Insurance Relief Form and can be found on www.revenue.ie

Patrick Brennan

Irish Health Insurance

 
1.Source www.hia.ie
2.Source www.hia.ie
3.Source Best available market calculation. Some market research would suggest this figure is as high as 23%