Business Travel and Leisure Insurance

To what extent is business and leisure travel insurance for employees and dependents taxable?

Didn't find your answer?

It is my understanding that if a company has in place business travel insurance for employees this would not taxable; however, if a company offers business and leisure travel insurance for employees and their qualifying dependents under one policy, would there be some BIK tax liability? If so (and I assume the answer is "yes"), can anyone confirm how to approach this for P11D or payrolling of benefits purposes? In particular:

1. If the taxable benefit amount for the employee-only insurance coverage would be the difference between the cost of the business travel insurance cover and leisure travel insurance (the difference in cost to be confirmed by the insurer)?

2. Would the additional costs paid by the company to add dependents be the taxable amount or would the entire premium be taxable?

Please note that the policy is between the company and the insurer and there are no named beneficiaries - i.e. it applies to all employees.

For example:

£100 per employee (business and lesiure travel cover)

£140 per employee (business and leisure) and partner (leisure travel cover)

£160 per employee (business and leisure travel cover), partner and children (leisure travel cover)

Replies (13)

Please login or register to join the discussion.

avatar
By Tax Dragon
14th Apr 2024 20:51

No-one in these threads ever suggests
3. the cost of leisure-only insurance.

Or
4. The cost of leisure plus business cover, apportioned in the ratio of answers 3 and 1.

Thanks (0)
Replying to Tax Dragon:
avatar
By chibu11
14th Apr 2024 22:02

I would assume the cost of leisure-only insurance provided by the company would be a taxable benefit at the full cost of the insurance, but as this is a mixed policy, it is unclear what would be taxable as a BIK by HRMC.

It may very well be that the cost of the leisure cover as a proportion of the total cost is the taxable item.

Thanks (0)
avatar
By FactChecker
14th Apr 2024 21:40

I've also never seen any 'travel insurance' that sounds even remotely related to what OP has set out:
- what is being insured (cost of travel ticket or whole holiday or associated medical expenses or even return of corpse)?
- "there are no named beneficiaries" ... so who receives any pay out?

I would expect a lot of other restrictions (frequency of flights / limited destinations / types of activity / medical history of every person in the party / etc), so a fixed price per employee sounds odd.

Conversely if the benefits, whatsoever they be, are only payable to the company then I guess the question of EE BiKs disappears?

Thanks (3)
avatar
By chibu11
14th Apr 2024 21:59

To confirm, the insurance provides items such as:
1. Medical/Hospital benefit
2. Replacement of Prescription medication
3. Personal accident (e.g. loss of sight, limb, etc.)
4. Loss of passport, baggage, money
5. Delay of departure/travel disruptions
6. Evacuation expenses
7. Personal liability

As it is a group insurance policy, the "assured" is the Company and the "insured persons" are all employees, plus dependents, with no medical underwriting required. All claims would be paid out to the "insured persons".

Thanks (0)
Replying to chibu11:
avatar
By Tax Dragon
14th Apr 2024 22:29

Forgetting the leisure part, why would an employee need a payout if delayed while going abroad for business?

It's your job to check the rules, but I imagine the starting point is the catch-all Ch10 charge and what you might think about is whether Pepper v Hart speaks to cost and/or what you might be looking for is a) an exemption and b) a rule about apportionment. Actually do Ss325 and 326 provide these? Have I done your job for you?

Thanks (1)
avatar
By DKB-Sheffield
14th Apr 2024 22:49

You have stated that the insurance applies to all employees (as opposed to 'is available to', or 'is offered to'). Would you care to elaborate?

Is this a 'group' policy to cover ALL travel for ALL employees? Or are they individual policies -all arranged by the company/ employer? What changes if an employee doesn't want the insurance - if indeed possible - re premiums etc.?

It may not change the BIK position, but would certainly make calculating the benefit interesting (starters, leavers, opt-outs - assuming employees can opt out of a policy they don't want(?), different needs (family etc.), excess premiums (health?)... etc.), and onerous - if not impossible. You may even find the 'cash value' of a comparative personal product - without economies of scale may actually significantly exceed the 'per person combined policy' (I'm comparing this to the insurance of private vehicles on a trade policy).

Or... is this a small company (2, or 3, employees), perhaps all directors, etc.? Potentially where the directors feel that tagging 'business travel' onto their holiday insurance makes it a non-income-taxable business expense (despite never intending to actually travel 'for business'.

Thanks (2)
Replying to DKB-Sheffield:
avatar
By FactChecker
14th Apr 2024 23:35

And to think I get accused of cynicism!
Your final para hadn't occurred to me - but is the only thing to make sense so far.

Thanks (4)
Replying to DKB-Sheffield:
avatar
By chibu11
15th Apr 2024 06:36

Thank you.
It is a single group policy taken out by the employer for employees’ business and leisure travel (so all travel for all employees) and dependants leisure travel. All employees are automatically covered, so there isn’t an enrolment process.

Thanks (0)
Replying to chibu11:
avatar
By Tax Dragon
15th Apr 2024 06:54

My view: If this is going to be annual, if the numbers are significant and if you don't know how to treat it, it would be worth getting paid advice in the first year.

Thanks (1)
Replying to chibu11:
avatar
By Paul Crowley
15th Apr 2024 08:42

How many employees?

Thanks (0)
Replying to Paul Crowley:
avatar
By chibu11
15th Apr 2024 09:01

About 40 employees and the example costs in the original post are close to the actuals.

Thanks (1)
Replying to chibu11:
avatar
By FactChecker
15th Apr 2024 15:46

I know this has nothing to do with answering your question ... but that's either the world's greatest bargain in insurance cover (and almost certainly unsustainable for the insurer), or there will be some *massive* exclusions/restrictions/caps in there.
[For example: it would cost me, on my own, considerably more than any of those prices to get merely adequate medical cover for a single trip to the USA.]

Nevertheless, assuming for now that this isn't some theoretical exam question, there is a matter of materiality ... now that we know there are 40 employees and the cover/employee averages c. £140 p.a., which means the total annual premium is presumably c. £5,600.

If, and it seems a big if to me, any pay out is to the insured employee (not the ER who took out the policy and paid the premiums) ... then it sounds like a major portion of each policy is a BiK (after all presumably the majority of employees aren't continuously flying around the world on wholly necessary business trips).
But you would come up with immense difficulty in accurately apportioning the 'cost' appropriate to each employee - particularly bearing in mind the excellent examples given by DKB-Sheffield yesterday (14th Apr 2024 at 22:49).

Fortunately that's where you might find a PSA useful ... https://www.gov.uk/paye-settlement-agreements

Thanks (3)
Replying to FactChecker:
avatar
By chibu11
15th Apr 2024 16:30

Thanks! I was thinking PSA as well, but wasn’t sure if appropriate. Super helpful.

Thanks (0)