COMPLIANCE
l sexual abuse l harassment and bullying l conduct and discipline l personal relationship difficulties. Additionally, the exemption can only apply if the welfare counselling is available to all employees of an employer on similar terms. Are certain types of counselling excluded from the exemption? Yes, the legislation specifically excludes the following from being exempt: l advice on finance, other than advice on
in this way, that “common sense should be applied” if the welfare counselling provided by an employer consists substantially of facilities that meet the exemption. HMRC states that this common-sense approach is more relevant where it’s difficult to draw the line between exempt and non-exempt counselling. Can family and household members be included? The exemption is intended for the employee and doesn’t cover dependents and others. However, HMRC recognises to some extent that limited services can be provided to an employee’s dependents and remain within the exemption subject to the conditions below: l there must not be a separate helpline number for spouses / partners / dependents l couple or family counselling is an acceptable clinical intervention, but spouses / partners / dependents should not be offered face-to-face counselling on their own l spouses / partners / dependents should not be offered access to the legal information component of the service. Are there other practical issues? A particular practical challenge can be legal or financial advice which, while excluded from the exemption, can sometimes be closely connected to a fundamental problem which is covered by the exemption. Take the example of an employee who has debt problems linked to alcohol dependency, who defaults on repayments on a loan with their bank and is threatened by the bank with further action to recover the outstanding repayments. She seeks legal advice via her employer’s EAP which covers this. The employee’s problems are ultimately caused by the alcohol dependency, on which she has sought advice via her employer’s EAP. This service qualifies for the exemption, based on the HMRC guidance at EIM21845. However, she has a legal problem which she has also sought advice on from the EAP. This wouldn’t normally qualify for the exemption. It may be difficult to distinguish if the advice from the EAP on the alcohol dependency has changed into legal advice on the loan issue (for example, if both are discussed in one call between the employee and the counsellor). HMRC’s guidance states that common sense
should be applied in these circumstances and where, “the fundamental problem is covered by the terms of the exemption”. This demonstrates why each programme needs to be considered on its own merits. In this example, the employer should already have sought to understand the tax treatment of the EAP, given that it covers issues which qualify (advice on alcohol dependency) but also those which don’t qualify (legal advice) for the exemption. What are the employment tax obligations if we provide taxable counselling services or a taxable EAP? Subject to the points highlighted above, if an employer provides a type of welfare counselling programme or EAP which isn’t exempt, the benefit value should be reported on the employees’ forms P11D. The employees would then pay tax on the benefits and the employer would pay class 1A NICs through the P11D(b) return. There may also be an opportunity to payroll the benefit for tax purposes. Where the employer would prefer not to disturb the employees’ tax positions and wants to meet the tax and NIC liabilities itself, it may (by agreement with HMRC) be able to include the benefit in a pay as you earn (PAYE) settlement agreement (PSA) if the benefit is either minor, irregular or impracticable. Summary As an employer, you may have existing, or be considering adding, additional welfare counselling measures or similar benefits to help employees deal with personal issues and navigate tough times. You should take care to review the terms and coverage, ensuring you understand the employment taxes position and reporting requirements so there are no unwelcome surprises should the arrangements be reviewed by HMRC. Employers should also keep an eye out for developments. As announced at spring budget 2023, the government will consult on options to increase investment in occupational health services by employers through the tax system. This to include a potential expansion of the existing benefits in kind for occupational health services or a potential super-deduction style relief for businesses who provide services to their employees. See http://ow.ly/5Chz50Otqyv for further information. n
debt problems l advice on tax l advice on leisure or recreation l legal advice.
What about medical treatment? Prior to 6 April 2020, the exemption didn’t cover medical treatment of any kind, but this rule has since been relaxed slightly. Certain types of counselling services which amount to medical treatment (the HMRC guidance gives cognitive behavioural therapy and interpersonal therapy as examples) are now covered by the exemption. Again, this is very narrow in scope and most medical treatment wouldn’t be expected to qualify. What happens if a wide range of services are provided, some exempt and some not? If an employer provides a range of welfare counselling facilities, some of which are exempt and some which aren’t, within a single programme, HMRC’s strict view is that the exemption wouldn’t apply to that programme. This is because the exemption doesn’t include a basis for apportioning the benefit. This means that all the component services provided under the programme need to be covered by the exemption for no benefit in kind to arise. Employers in this position might consider dividing their programme into two separate schemes. One programme covering the counselling services which qualify for the exemption (which the exemption could apply to) and one which includes the services which don’t qualify (on which a benefit in kind is liable to income tax and NICs would then arise). However, the HMRC guidance says that if it isn’t possible to separate the services
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| Professional in Payroll, Pensions and Reward |
Issue 91 | June 2023
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