Can I pay for my employee’s eye test via my limited company?

At A E Scott Accountants, we're here to guide our clients through the complexities of workplace benefits and tax implications, ensuring clarity and compliance at every turn. In the realm of workplace health and safety, particularly regarding the use of visual display units (VDUs), there are significant benefits employers can offer their employees without incurring additional tax liabilities.

Under the stipulations of S320A ITEPA 2003, employers are afforded an exemption from taxable benefits when covering the costs associated with eyesight tests and corrective appliances, such as glasses or contact lenses, necessary for VDU use in the course of an employee's duties. This exemption hinges on two critical conditions:

Condition A stipulates that the provision of the eye test or corrective appliances must be a requirement under the regulations enacted by the Health and Safety at Work etc. Act 1974. Condition B ensures that these essential tests and appliances are made available to all eligible employees as mandated by the aforementioned regulations.

It's imperative to note that any provision or financial contribution towards the cost of spectacles or contact lenses for general use, which also includes VDU use but does not necessitate a specific prescription solely for VDU work, will incur a taxable benefit. This delineation necessitates a clear demarcation of costs related to VDU-specific use versus general usage. Employers and employees are advised to retain detailed receipts to facilitate this distinction, as recommended by HMRC's guidance at EIM21765.

Should an eyesight examination reveal a broader need for corrective lenses beyond VDU use, and an employer chooses to cover the entire expense, it's important to be aware that liability for Class 1 NICs may arise on the portion exceeding the VDU-specific prescription costs, according to NIM02145. This is an instance of the pecuniary liability principle, wherein an employer's payment of an employee's personal expense triggers a taxable event, as outlined in EIM00580 and S62(3A) ITEPA 2003.

Furthermore, arrangements made by an employer with an optician to directly supply the necessary glasses to the employee will be exempt from Class 1 NICs under the specific provisions of payment in kind (regulation 25 and paragraph 1 of Part II of Schedule 3 to the Social Security (Contributions) Regulations 2001).

In conclusion, while employers are able to reimburse or directly cover the cost associated with the VDU-specific portion of an eye test and prescription glasses or contact lenses, any additional payments beyond this scope may result in a pecuniary liability or benefit-in-kind (BIK) on the total cost incurred. As your accounting partners, A E Scott Accountants are here to provide guidance and support in navigating these regulations, ensuring both compliance and optimal benefit from such workplace provisions.