EIM21845 – Particular benefits: exemption for welfare counselling
Section 210 ITEPA 2003 and S.I. 2000 No. 2080
The provision by an employer of counselling facilities to an
employee represents a chargeable benefit, but in certain
circumstances welfare counselling provided by an employer for its
employees is exempt from tax.
The exemption is tightly drawn and there is no intention
that all conceivable types of welfare counselling should be
exempted from tax. The type of subjects the exemption is intended
to cover includes:
- Stress
- Problems at work
- Debt problems
- Alcohol and other drug dependency
- Career concerns
- Bereavement
- Equal Opportunities
- Ill-health
- Sexual Abuse
- Harassment and Bullying
- Conduct & Discipline
- Personal Relationship Difficulties.
For the purposes of this exemption welfare counselling is counselling of any kind except:
- medical treatment of any kind, or
- advice on finance, other than advice on debt problems, or
- advice on tax, or
- advice on leisure or recreation, or
- legal advice.
Employee Assistance Programmes (EAP)
Where welfare counselling services - sometimes called Employee
Assistance Programmes - include a range facilities or treatment,
some of which fall outside the scope of the exemption, strictly the
exemption does not apply to any of the services provided because
the exemption does not include any basis for an apportionment of
the benefit. Consequently all the component parts of the programme
need to be covered by the exemption in order for it to be exempt
from tax and NICs.
It follows that if there are some services provided under an
EAP which clearly satisfy the terms of the exemption, and others
that clearly do not, it makes sense for the two sets of services to
be separated – if possible into entirely separate schemes
– so that one is exempt from charge, whilst the other
represents a benefit to the employees who avail themselves of the
facility.
However, if it is not possible to separate the services in
this way, common sense should be applied where the welfare
counselling provided by an employer consists substantially of
facilities that satisfy the terms of the exemption but also to a
not significant proportion of the services provided which do not
satisfy the exemption. This applies particularly on occasions where
it is difficult to determine where to draw the line between
counselling which falls within the exemption and counselling which
is outside of the exemption.
Legal information and advice
One area where it can be difficult to determine where to draw the line is in connection with legal information and advice provided in connection with an issue that is causing an employee anxiety or distress.
Example
Whilst legal advice is excluded from the exemption, it may be
that because of an alcohol or drug dependency problem, an employee
is short of money and has defaulted on mortgage payments due on his
home. Consequently he is threatened by his mortgage provider with
eviction from his home.
The employee’s fundamental problem is caused by the
dependency, on which he seeks advice from his employer’s EAP.
But as a consequence he also has a legal problem on which he seeks
advice from the EAP regarding his rights and obligations to the
mortgage provider.
It may be difficult to distinguish how and at what point the
advice from the EAP relating to the dependency changes into advice
on the legal issues,
especially if both issues are covered in one telephone call
or in one face to face meeting. Common sense should be applied in
these circumstances, where the fundamental problem is covered by
the terms of the exemption.
On the other hand, if the employee contacts the EAP
specifically to request legal advice, the counselling provided is
clearly not within the exemption. Sometimes an initial call to an
EAP may result in general advice on dependency and associated legal
issues (which, depending on circumstances, may be accepted as
meeting the terms of the exemption) but this initial contact may
lead to a referral for specific and bespoke legal advice, either
from the employer’s in-house lawyers or by referral to an
outside legal practice. The bespoke legal advice is clearly not
within the exemption.
Consequently each welfare counselling programme needs to be
considered on its own merits so that due consideration could be
given to the correct tax treatment.
HMRC has agreed with the UK Employee Assistance
Professionals Association (EAPA) that legal information provided
within the context of welfare counselling for employees will not
prevent the exemption from applying as long as it remains within
agreed guidelines. The EAPA has summarised those guidelines for its
members and a copy can be accessed from within the following page
http://www.hmrc.gov.uk/specialist/welfare-counselling.htm
The principles set out in these guidelines are not
restricted to members of the EAPA and can be applied to any welfare
counselling programme provided for employees.
Dependants
HMRC has seen some EAPs which provide welfare counselling to
dependants and/or family or household members of employees. The
exemption does not extend beyond the employee concerned.
Consequently any EAP which is made directly available to dependants
and others, as well as to employees, does not satisfy the terms of
the exemption.
However, in recognition of the fact that employees may
sometimes be affected by family and relationship difficulties,
limited services can be provided to an employee’s dependents
by employee assistance services and still remain within the welfare
counselling exemption provided the guidelines below are
followed:
- There must not be a separate helpline number for
spouse/partner/dependents.
- Couple or family counselling will not prevent the exemption
from applying but a spouse/partner/dependent must not be offered
face to face counselling on their own.
- Spouse/partner/dependents will not be given access to the legal
information component of the service.
