Income Tax (Earnings and Pensions) Act 2003 section 325A

Health and employment insurance payments

Section 325A exempts from income tax as employment income certain payments received under health and employment insurance policies, where the employee contributed towards the premiums on a policy taken out by someone else for their benefit.

• Payments under health and employment insurance policies can be exempt from income tax as employment income if they would also qualify for exemption as annual payments under section 735 of ITTOIA 2005
• The payments must be made to an employee who contributed towards premiums on an insurance policy taken out by another person wholly or partly for the employee's benefit, or to the employee's spouse or civil partner
• The insurance payments received must be attributable on a just and reasonable basis to the contributions or premium payments the employee actually made
• Both conditions must be met simultaneously — the recipient must be an eligible person and the amounts must correspond fairly to the employee's own contributions