Private Medical Insurance (PMI) provider WPA has released evidence the tax treatment of its Corporate Deductible schemes is sanctioned by the taxman.
PMI insurers price corporate policies on previous claim experience, creating a claim fund, considered risk-free because the client company will likely claim up to a certain amount.
However Insurance Premium Tax (IPT) applies to the entire premium, including the claim fund.
In 2010 WPA developed a corporate deductible proposition for large (200+) schemes, replacing the claims fund with a corporate deductible account, thus reducing the IPT bill and National Insurance costs.
P11d is a simpler matter, calculated on the total cost to the company, divided equally amongst employees receiving the benefit.
The scheme has met resistance amongst employee benefit consultants wary of the taxman's reaction to this stance.
Rachel Riley, head of new business at WPA, said: "Having developed this concept two years ago the challenge is proving it workable.
"In April 2010 HMRC confirmed IPT was not payable on the corporate deductible element."
To put this beyond doubt WPA has now had this position confirmed with specialist tax council.
Riley added: "We have recently also had updated guidance from HMRC, which, in full knowledge of the details, has confirmed our treatment of P11d.
"It is important to note that this treatment has received no formal challenge.
"I think it could now be argued that every large corporate sale or renewal on a fully insured basis is a miss-sell."
Rosalind Johnson, legal director at WPA compared the schemes to the early days of Healthcare trusts.
She said: "When HCTs were introduced there was there was a lot of circumspection over the exposures they might bring. Gradually people came round and they are today an integral part of the market. We are on a similar migration route."
She added that WPA also believes several other PMI providers are soon to enter the market with similar schemes.
