Where welfare counselling services - sometimes called Employee Assistance Programmes (EAP) - include a range of 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 National Insurance contributions.
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.
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.
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.
HM Revenue & Customs 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 via the attached link
EAPA UK – Legal & Professional Elements of a core EAP (PDF 27K)
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.
Further guidance on Welfare Counselling can be found on
EIM21845 Exemption for
welfare counselling
