Fears that tax changes to health screens would lead to a reduction in the numbers using them has forced a government rethink.

Legislation that required employers to offer health screening and medical check-ups to all employees if they wished to claim it tax free has now been suspended.

Many in the industry, including Bupa, have lobbied the government to reconsider, arguing that it would lead to employers simply restricting the benefit to their most valued employees.

Aon Consulting head of healthcare Alex Bennett said: "Executives already receiving full health screening (will be) compensated for their benefit in kind taxation, whilst less valued or well rewarded staff would either have the benefit removed, or would ask that the benefit be removed so that they could avoid the taxation.

"We understand that a lot of others shared this view and a wide and vocal lobby has been voiced in opposition to this legislation in its current form. As a result they will look again and make a decision by 4th January 2007. We will be making our opinions known through this further consultation phase."

A statement issued by the HMRC on Friday said that it was concerned that some existing health screening schemes could be affected in a way that was not envisaged at the time the regulations were made.

It said: "HMRC want to discuss the issues arising from the regulations with employers and their representatives in order to find a way forward that meets the needs of both HMRC and employers on this matter.

"In the meantime, for 2007/08, HMRC will not seek to collect tax and NICs in respect of health screening and /or medical check ups where it would not have been payable on the basis of the previous non statutory treatment."