# Vhi & Bik



## paul24 (3 Feb 2006)

Can someone explain to me the benefits or not of having your company paying your VHI. I have always got it payed in the past with it having no real effect on my salary.
However the company I am now with are talking about the BIK on it and how it doesn't really work out that beneficial. They explained the reason but lost me completely.

Is it still financially worth while having the company pay it or does it work out that the month they pay it you end up will a huge chunk out of you salary.

I would appreciate if someone can shed some light on it.


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## CCOVICH (3 Feb 2006)

Your tax payable for the year is affected, not just for the month in which the company pays your VHI, i.e. the BIK 'hit' is spread over 12 months.


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## ClubMan (3 Feb 2006)

Don't forget that even when you are hit for _BIK _income tax/_PRSI _on the health insurance payment you can still claim the standard rated tax credit on the payment in kind. See [broken link removed].

Basically...

Say your employer pays a premium of €800 on your behalf
You are liable for 20% or 42% tax on that _BIK_
You are also liable for _PRSI_/health levy (4% up to the €40K+ _PRSI _ceiling/2% health levy)
You get a tax credit of 20% in respect of the premium payment
I think the employer also gets some tax credit in respect of the premium.

I also think that both the employer and employee are better off in this situation than if the money (€800 net after tax/_PRSI_) was paid as normal salary rather than as a _BIK_ but I haven't crunched the numbers to check.


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## Brendan Burgess (17 May 2006)

Am I right in saying that there is no tax difference in who pays the VHI? 

Say your employer pays you €1000 in salary

You will pay tax at 42% and employees PRSI  at say 2% 

So you will get €560 into your hands

If you pay €1000 VHI premium yourself
You get €200 tax relief
And € 560 net

Net cost to you €240. 

If your employer pays €1000 VHI on your behalf

You will pay 44% BIK, or 440 
You can claim tax relief of 200

So the net cost is €240  

The Administrative burden on the employer and employee seems huge. According to the Revenue website: 

*Employer paying the FULL Premium for an employee *
The renewal notice to the employer shows the net premium due - €1,600 (Gross Premium is €2,000)
Employer:
Pays insurance provider the net of tax relief premium of €1,600.
 Pays TRS [€400] attributable to premium to Collector General
 Operates PAYE/PRSI on €2,000 notional pay to employee
Employee:
As the employee has not benefited from the tax relief arising on the medical insurance premium paid by the employer, the employee is entitled to a tax credit of €400 (€2,000 at 20%) in his / her certificate of tax credits and standard rate cut off point.


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## ClubMan (17 May 2006)

Brendan said:
			
		

> Am I right in saying that there is no tax difference in who pays the VHI? .


 That's my understanding based on crunching the numbers for my own situation in the past. Your calculations look correct to me at first glance.


> You will pay tax at 42% and employees PRSI  at say 2%


 I presume you're assuming that the employee's gross is over the employee _PRSI _contribution threshold so the _VHI _payment is coming out of income subject to tax and and 2% health levy but no 4% _Class A PRSI_?


> The Administrative burden on the employer and employee seems huge.


 It's a bit of hassle for the employee anyway. S/he has to manually claim the tax credit which will be added to the statement of tax credits (like the old way before tax relief at source). If the annual premium changes then s/he must update _Revenue _with the details in order to have the statement of tax credits adjusted. It certainly does seem like more hassle for employee and employer than the normal tax relief at source approach.


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## greenandred (12 Mar 2008)

Is it more beneficial to get your company to pay where you also own the company ? 

Rgds


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## MugsGame (12 Mar 2008)

Since the introduction of BIK, there is no tax benefit to the company paying it on your behalf. I don't think it matters whether you own the company or not.

Companies usually gets a 10% "Group Scheme" discount, but you can get this yourself if you pay online.


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