Taxation
counselling it is revealed that one reason for this is anxiety over not knowing to what they are legally entitled. If the employee were to be given personalised legal advice under the terms of the EAP, which is specifically excluded from the exemption, the whole EAP would potentially become a chargeable benefit. However, if it is to support the emotional wellbeing of an employee, the signposting to legal and financial information could be within the exemption. Any advice given in this way must be secondary to the main reason for contacting the EAP service and any legal or financial information provided should be at a very high, general level that gives the employee a way to identify what their next step should be, outside of the EAP. The example given above is one of many scenarios that could arise where interpreting and applying the rules is difficult and could lead to unintended tax consequences. Whilst there are no easy solutions, the starting point should be how the terms of the service are set out to employees, so it is clear what is and isn’t included. Family and household members Another area that can cause difficulties in its interpretation is the provision of welfare counselling to dependents and members of the same household as the employee. It is felt by many EAP providers that the exemption does not go far enough and is not as generous with the tax rules compared with many other countries. Most countries exempt from tax the counselling of dependents separately to the employee. In the UK, the exemption is intended for the employee and does not cover dependents and others. Couples
and family counselling are included in the exemption, but face-to-face counselling that does not include the employee would be outside. ...widely felt that there is a need to both clarify and expand the current exemption to bring it up to date. However, if there are issues in an employee’s home life this will often cause performance issues in the workplace. HMRC recognises this to some extent and limited services can be provided to an employee’s dependents and remain within the exemption subject to the conditions below: There must not be a separate helpline number for spouse/partner/dependents. Couple or family counselling is an acceptable clinical intervention, but a spouse/partner/dependent should not be offered face to face counselling on their own. Spouse/partner/dependents should not be offered access to the legal information component of the service. Volunteers Another case where an EAP would be valuable to employers would be to allow EAP services to be available to volunteers, for example, special police constables and volunteers supporting victims and witnesses of crime. In some cases, volunteers are exposed to the
same stresses and anxiety that employees have, as they are effectively performing the same job. The volunteer status of such individuals is important, as it means that travel expenses to the workplace are exempt from a tax/NICs charge. However, this could be affected if they receive work- related benefits. An option for them to be included without it affecting their volunteer status would help both the volunteers and the organisations that use them. ‘Good’ employers take their responsibility for their employees seriously, and that responsibility extends to volunteers as well. The ability to include them in an EAP would demonstrate that responsibility. EAPA guidance In November 2008, the Employee Assistance Programme Association UK (EAPA) produced an information document explaining the boundaries for legal and financial advice and dependents counselling services which HMRC uses as part of its guidance. This was to help to define the exemption and give clear guidance. However, this information document is now considered to be out of date, especially with regard to welfare counselling services for dependents. It is widely felt that there is a need to both clarify and expand the current exemption to bring it up to date. As well as helping employers to maintain a productive and healthy workforce, it would also relieve some of the strain on NHS mental health services. PSTAX is involved in discussions involving the EAPA and gathering information regarding the coverage of EAPs with a view to making a case for the rules to be made more generous and clearer. Summary Although the tax exemption for welfare counselling is well-intentioned and useful for employers, it does come with certain practical difficulties in terms of interpreting the rules and is not as generous or flexible as it could or should be. Whilst it is hoped that these concerns will be addressed soon, great care should be taken in the meantime to ensure that there are no unwelcome surprises should an employer’s arrangements be reviewed by HMRC. n
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| Professional in Payroll, Pensions and Reward |
Issue 73 | September 2021
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