# BIK/Tax Relief on Health Insurance



## DACMAN

Hi,
My company is proposing to cover 50% of my Health Insurance, as I understand it I will be liable for a benefit in kind tax  & I should also be able to avail of some extra tax credit because I will still contribute 50% of the cost. My Q  -  do I have to make a tax return to the revenue to resolve this? At present I pay health insurance by direct debit every month so I'm wondering if I can claim some tax back on this also?
Thanks


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## rmelly

You are probably already getting tax relief at source of 20% on your existing policy - check your quote.


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## Guest128

Hi,
You should get tax relief at source on the 50% you pay yourself while the company should get the same on the 50% they pay, thereby reducing the actual premium you pay. At source meaning that its deducted before it gets to you so if the gross premium is say €200, the actual amount each of ye pay is €80 (50% of €200 minus 20% of the result (tax at source)).

However, as the company is paying 50%, this is a BIK taxable income for you and you are entitled to Medical Insurance relief on it. Currently for me this year it is €143, it should appear on your certificate of tax credits once you have gotten it.

HTH


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## simplyjoe

If your employer pays the total health insurance the situation is as follows: Say total premium €1,000 gross before tax relief.

BIK = €500 and tax at marginal rate of tax. You or your employer needs to have your tax credits adjusted to reflect a tax credit of €200 (€1,000 x 20%). The employer can only pay the gross amount. He deducts your portion (€500) from your net salary.
Some major employers have been operating this scheme incorrectly and their employees have recently received tax refunds. The scandal is that the mistake has been going on for a lot longer than the 4 years now refunded. Has anyone lost their job over this mistake?! Where were the trade unions?


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## ClubMan

DACMAN said:


> My company is proposing to cover 50% of my Health Insurance, as I understand it I will be liable for a benefit in kind tax  & I should also be able to avail of some extra tax credit because I will still contribute 50% of the cost. My Q  -  do I have to make a tax return to the revenue to resolve this? At present I pay health insurance by direct debit every month so I'm wondering if I can claim some tax back on this also?
> Thanks


You need to inform _Revenue _(not necessarily a full tax return - just write a letter) if your circumstances change. These _FAQs _might be of interest to you:



[broken link removed]
[broken link removed]


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## simplyjoe

Clubman. Thanks for that link. However the attached appears to contradict your link. Am I correct in that there is a contradiction. See section in regards to Medical insurance/BIK.

[broken link removed]


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## ClubMan

I don't see where any potential contradiction arises. Perhaps you could quote extracts from the two sources side by side to illustrate where you see one?


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## simplyjoe

Quote from 'Application of PAYE/PRSI to BIK guide' *21. What is the position where the employer pays 50% of the medical insurance premium for an employee? How does it impact on the employee's entitlement to Tax Credits? *This is best answered by way of an example:An employer discharges the full amount of the premium and recovers 50% of the premium (net of TRS) from the employee.Assume the Gross Premium is €1,000TRS (Tax Relief at Source) €200Net Premium € 800Recovered from employee €400The employer pays over €800 to the authorised insurer (€400 of which is recovered from the employee) and pays €100 TRS (amount attributable to the €400 paid by the employer) to Revenue.The taxable benefit (notional pay) is:Cost to employer €900 (€800 premium paid + €100 TRS paid)Less amount made good by employee €400Notional Pay €500The employee is entitled to a tax credit of €500 @ 20% in his or her certificate of tax credits.
Quote from 'Benefit in Kind Guide' - item 3 E*xample 1*Where the gross premium payable (before TRS) is €1,000 and the employee makes good the sum of €300 to the employer, the notional pay is €700.The employee in the above example will be entitled to a standard rate tax credit in respect of the gross premium, i.e. €1,000 @ 20%, in his or her Certificate of Tax Credits and Standard Rate Cut- Off Point.

One says that the employee gets the tax credit for the full premium whilst the other states it only gets the tax credit for the employers contribution.


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## ClubMan

Well one is dealing with the case of the employer paying 100% of the premium and the other is dealing with the case of the employer paying 50% and the employee paying the other 50%. In the former case the employee claims the tax credit in respect of the gross premium via their statement of tax credits. In the latter I presume that they do likewise for the 50% premium paid by the employer but they get tax relief on their own 50% at source?


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## simplyjoe

Afraid not Para 21 states employee pays 50% of the insurance and gets 50% on tax credit and 50% at source whilst example 1 states employee pays 30% of the insurance but gets 100% tax credit - no relief at source. Am I missing something here.


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## Sammie

Hi am confused about this BIK tax.
My health insurance is €502.94 a year and my employer covers this.
Can someone tell me what I should pay in BIK per month work out as? 
How the TRS is calculated?


thanks


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## ClubMan

The _BIK _should already be taken care of via payroll. If €502.94 is the gross annual premium then _BIK _is charged on that. You can then apply separately for a standard rated tax credit in respect of this amount which will be worth c. €100 to you.


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## Sammie

yeah i have my slip and just want to check that it's correct.
they have my gross salary + BIK of €52.39 (they say that's cost per year+TRS)

so then they have ((my gross salary + BIK) - (PAYE+PRSI)) - BIK i.e €52.39) = net salary


is this correct??  why are they adding on the TRS to the cost of health insurance and then dividing it monthly.... is this how it's worked out?

sorry for the stupid questions.  it's just that it was around the €43 mark and now it has changed???


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## ClubMan

Sammie said:


> they have my gross salary + BIK of €52.39 (they say that's cost per year+TRS)


You mean per month?

€502.94 seems to be the annual cost net of _TRS_. The gross cost is €502.94 / 8 * 10 = €628.68 / 12 = €52.38 which is what you are seeing above - i.e. the gross monthly cost.


> so then they have ((my gross salary + BIK) - (PAYE+PRSI)) - BIK i.e €52.39) = net salary
> 
> is this correct??


Yes.


> why are they adding on the TRS to the cost of health insurance and then dividing it monthly.... is this how it's worked out?


Because you are charged _BIK _on the gross premium. You can now apply for a standard rated tax credit on the €628.68 figure which will be worth c. €126 to you once you get an updated statement of tax credits.


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## Sammie

that's great.  thanks a lot for your help!


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