How are employer premiums treated in Income Protection Insurance policies?

In Income Protection Insurance, the treatment of employer premiums is that they are considered tax-free for the employee and classified as a tax-deductible business expense for the employer. This means that when an employer pays for an Income Protection Insurance policy on behalf of their employees, the premiums can be deducted from the employer's taxable profits, minimizing their tax burden.

This treatment is beneficial for both parties—employees receive the coverage without incurring a personal tax charge, and employers can reduce their overall tax liability through the deduction. The terms of the policy and any payouts received by the employee under the insurance will primarily determine other tax implications, but the payment of premiums itself remains advantageous under current tax regulations.

In contrast to other options, the scenario described aligns with the regulatory framework governing business expenses and employee benefits. For example, if premiums were taxable to the employer, the cost would not encourage them to provide such insurance. Therefore, option B captures the correct tax implications of employer-paid premiums for Income Protection Insurance.