Taxes Consolidation Act 1997 section 125

Tax treatment of benefits received under permanent health benefit schemes

Section 125 provides that benefits received under an approved permanent health benefit scheme are treated as employment income and are subject to income tax under the PAYE system.

• A permanent health benefit scheme is any Revenue-approved scheme, contract, policy or arrangement that provides periodic payments to an individual who suffers a loss or reduction of income due to ill health.
• A policy of permanent health insurance, sickness insurance or similar insurance qualifies as a permanent health benefit scheme if it conforms with a standard form approved by Revenue, or varies from such a standard form only in ways that Revenue has specifically approved.
• Any benefits received under an approved scheme are deemed to be profits or gains from employment and are therefore chargeable to income tax under Schedule E, with PAYE applying to all payments.
• Tax relief is available on contributions to an approved scheme, but the total contributions must not exceed 10% of the individual's total income for the relevant tax year.