Welfare Counselling – HMRC provides guidance on Employee Assistance ProgrammesMonday, January 12th, 2009
In a recent update to the Employment Income Manual (EIM), HMRC provides clarification on the tax status of welfare counselling services provided by means of Employee Assistance Programmes.
Welfare counselling is exempt from tax as a minor benefit under the provisions of The Income Tax (Benefits in Kind) (Exemption for Welfare Counselling) Regulations 2000 where it is provided to employees generally on similar terms.
The term “welfare counselling” means counselling of any kind other than
- medical treatment of any kind, or
- advice on finance (other than on debt problems), advice on tax (other than pensions advice), or on leisure or recreation, and legal advice.
The types of subjects that the exemption is intended to cover include:
- problems at work
- debt problems
- alcohol and other drug dependency
- career concerns
- equal opportunities
- sexual abuse
- harassment and bullying
- conduct and discipline
- personal relationship difficulties.
Some welfare counselling schemes, or Employee Assistance Programmes (EAPs), provide a mixture of services, some of which may be exempt, some of which may not. In principle, therefore, such all-inclusive schemes do not meet the conditions for exemption if they include counselling that is specifically excluded. HMRC’s advice is that it would be better for employers to provide two schemes, one that provides exempt services, another that provides non-exempt services. However, guidance in the Employment Income Manual for tax inspectors is that they should apply common sense where a scheme “consists substantially of facilities that satisfy the terms of the exemption”.
Such a common sense approach is helpful where it is difficult to determine whether particular counselling falls within or without the exemption. For example, an employee may have an alcohol or drug dependency problem and, as a result, defaults on mortgage payments. The phone call to the EAP may, as a result, include aspects of the problem that are exempt – the dependency problem – and not exempt – the legal advice on mortgages. If the fundamental problem is exempt, the consequential legal advice would not mean that the exemption is lost.
HMRC has agreed a set of guidelines for these issues with the UK Employee Assistance Professionals Association (EAPA) and the exemption will not be lost as long as the guidelines are followed. Further information is available at www.hmrc.gov.uk/specialist/welfare-counselling.htm.
The exemption does not apply to welfare counselling provided to an employee’s dependents or family or household members. However, as employees may be affected by family and relationship difficulties, HMRC accepts that limited services can be provided to dependents and family members without the exemption being lost as long as:
- there is no separate helpline number for spouse/partner/dependents
- a spouse/partner/dependent is not offered personal face-to-face counselling
- a spouse/partner/dependent does not have access to any legal information component of the service.
Exemption for welfare counselling
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