Income Tax (Trading and Other Income) Act 2005 section 735

Health and employment insurance payments

Section 735 provides an exemption from income tax for annual payments received under insurance policies that cover health or employment risks, provided certain conditions are met.

• Annual payments under an insurance policy are exempt from income tax where they represent benefits insuring against health or employment risks.
• The exemption only applies if none of the premiums paid under the policy have been deducted in calculating the insured person's income for tax purposes.
• Additional conditions regarding the payment period, the risk of significant loss, and (where relevant) policies providing other benefits or linked policies must also be satisfied.
• Special rules apply where the policy benefits someone other than the person paying the premiums, and these may modify the premium deductibility requirement.