Insurance premium tax (IPT) has put protecting the health of employees out of reach for more than 400,000 companies, research suggests.
The Opinium poll from Bupa found the increased cost of IPT, which has doubled in the last five years, was the key factor in three in 10 businesses cancelling or deciding against providing health insurance cover for their staff.
The UK now has the second highest rate of IPT on health insurance in Europe, second only to Greece.
When IPT is considered alongside National Insurance and benefit in kind taxes, the total tax rate facing businesses that want to invest in their employees’ health is between 50% and 72%, depending on whether the employee is a basic or higher earner.
The poll found 76% of SME owners view IPT as hypocritical.
Most businesses (82%) that do offer health insurance said they would consider cancelling these health benefits if IPT is pushed up much further.
Conversely, 44% of businesses without health cover would consider it if it were cheaper.
Alex Perry, chief executive of Bupa UK Insurance, argued that businesses should not be heavily punished for doing the responsible thing and looking after their employees’ health.
“They are doing good when they fund health insurance for their people – and also taking huge pressure off the NHS. It makes no sense and is unfair to hit them with punitive rates of tax,” he said.
Stuart Scullion, executive chairman at the Association of Medical Insurers and Intermediaries, added: “We can’t ignore the very real impacts resulting from increased levels of this ‘health tax’ – not only is it adding millions to the financial burden faced by the NHS but it’s also punishing businesses who choose to support the health of their workforce.”