Cash plan provider urges Osborne to scrap IPT

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Sovereign Health Care is calling on chancellor George Osborne to scrap Insurance Premium Tax (IPT) for health cash plans, whether funded by employers or individuals, in the forthcoming Autumn Statement.

The tax is currently included in the cost of cash plan premiums at a rate of 6%.

Sovereign Health Care said it wants to see cash plans funded by businesses for their employees no longer treated as P11D benefits.

The cash plan provider said the adoption of its recommendations would help make everyday health care affordable and accessible for more people and would ease some pressure from the NHS and HMRC.

Sovereign also said the "proposals are particularly timely", following the recent launch of the five-year plan for the NHS by six national bodies, which reiterated that an annual shortfall of £30bn in the service's funding would open up by 2020.

Russ Piper, chief executive of Sovereign Health Care said: ""Unlike other types of insurance, our (health cash) plans are designed to be used frequently. In addition, they're community-priced: everyone pays the same, regardless of age or medical history, and premiums don't increase if you make a claim. We therefore feel the current tax arrangements are counter-productive."

Mr Piper said removing IPT for cash plans would also align them more closely with types of insurance that are already exempt, including life assurance, income protection and dental plans.

He added: "In reality, we pass on a comparatively low amount of IPT to HM Revenue & Customs, yet have to fund the relatively high administration costs of collection. Indeed, our charitable trust gave more in donations last year than we passed on in IPT."

He added the tax regime also currently hinders uptake of employer-paid cash plans, by treating them as a benefit in kind for employees, requiring the completion of P11D forms.

Piper said: "Employers widely regard the expense and time involved in administering the P11D requirements as unrealistic for low cost benefits such as cash plans. This is often stated by prospective firms as a reason for not funding cash plans for employees to help support their health and wellbeing."

He described the government's policy as "frequently inconsistent with, and in many ways contradicted, its own initiatives."

The 2014 Finance Bill exempts from a charge in income tax any benefit-in-kind payment up to £500 where an employer funds recommended medical treatment to support an employee's return to work after illness or injury.

Piper concluded: "Compare this to employer funded cash plans - designed to help employees with their health care costs - which are not exempt from tax. Prevention is better than cure, but in this case it is prevention that is being taxed.

"For all these compelling reasons, we call on the chancellor to announce the reforms we've outlined when he addresses the House of Commons on 3 December."

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