Income protection BIK?

An employer pays for a Income Protection plan covering named employees - do we have a choice?

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Hopefully someone can help me with a query on income protection policies paid for by an employer.

The policy covers 2 named employees, in the past the premiums paid have been reported as a BIK on the P11D for the relevant employees.  Looking at ITPM6120

The provision of an employer’s scheme does not constitute a taxable benefit for the employee - EIM21820. If it were taxed as a benefit the employee wouldhave, in effect, paid the premium out of taxed income. Payments received under the policywould therefore be exempt.

In the past they have been added to the P11D so that they are treated as paid out of taxed income and any payments received would be exempt.  However reading EIM21820 it states under Section 202(1)(c) ITEPA 2003

Where sick pay is provided under arrangements with an insurance company or by some other third party fund, the right to receive sick pay or the prospect of receiving it is not a benefit chargeable on directors and employees.

This suggests to me there is no choice, the premiums are not taxable as a BIK under Section 202(1)(c) ITEPA 2003.

I was thinking:

  1. Should I stop declaring a BIK, result is any payments are taxable (strict basis) or
  2. If we carry on declaring a BIK would HMRC accept any payments received are exempt as the employees have effectively paid out of post taxed income (ITPM6120 does say "IF they are taxed"....but not sure that is saying they can be), or would HMRC state S202(1)(c) ITEPA2003 exempted the BIK and so they P11Ds were wrong/should not have paid tax on it; and they will tax the receipts anyway?

I suppose the crux of the matter is do we actually have a choice?

Many thanks.

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