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Benefits to deceased employees family

Are benefits provided to deceased employees family taxable?

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An employee who received private medical cover for themselves and family has died ending any private medical cover for their family.

Under the tragic circumstances the employer of the deceased employee wishes to continue to provide private medical insurance for the surviving spouse and children for a period of time.

Is this new provision taxable and reportable (ie P11D) and if so against whom? The deceased employees estate. Or on the family members covered who are not employed or employees?

many thanks

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By WhichTyler
17th Oct 2019 10:12

It's probably not a deductible expense for the employer, as it's a voluntary gift to the family

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By David Heaton
17th Oct 2019 17:24

It's probably going to 'count as employment income' of the widow under ITEPA s393B/394, but she's not deemed to be an employee, so there's no P11D obligation, just SA.

If it's a voluntary pension to the dependants of a deceased employee, there's no reason for the company not to get a corporate tax deduction. The employer is taking care of its staff and their families, which is (in company terms) clearly for the benefit of the trade by keeping the rest of the staff happy and motivated.

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Replying to David Heaton:
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By raycad
21st Oct 2019 18:34

I agree in principle, David, but, at the risk of splitting hairs, would you not agree that the charge (as "deemed employment income") would arise under sec633 of ITEPA. See EIM74011, firstly the reference to:

"the payment is paid to a former employee or office holder or to their widow, widower, surviving civil partner, child, relative or dependant..."

which seems to apply to the case in point, and then:

"Section 633 ITEPA 2003 generally applies to payments that form a series of payments or gifts. Isolated gifts to former employees may be chargeable as employment income either as general earnings or because they are in connection with the termination of the employment."

It looks like we are indeed dealing with a "series of gifts" in this posting.

You may be right about the CT deduction but I think there are plenty of Inspectors who might argue that, as s633 applies to voluntary annual payments, then no deduction would be due. Debatable either way, I think.

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Replying to raycad:
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By Tax Dragon
22nd Oct 2019 07:14

But there's no payment to the widow, so I think s633 is not in point.

What there is is the provision of what would be a BIK if provided to an employee. When the recipient is an employee, there are detailed rules to quantify the amount of the BIK that counts as earnings. The question I would pose is whether those rules quantifying a benefit also apply for s393A/B/s394.

If not, what has the widow actually received?

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Replying to Tax Dragon:
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By Tax Dragon
22nd Oct 2019 09:14

Having made it to work and fired up the legislation... my question is trivially answered - s398.

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Replying to David Heaton:
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By Tax Dragon
22nd Oct 2019 09:39

David Heaton wrote:

she's not deemed to be an employee, so there's no P11D obligation, just SA.

But having fired up the leg, I thought I'd have a quick check of this answer and I think Reg 12(1)(b) might say otherwise. We're in SI 2003/2682, of course, wherein "other payee" means a person receiving relevant payments in a capacity other than employee, agency worker or pensioner.

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