COMPLIANCE
Employee well- being – what can employers do? What are the tax consequences?
Beverley Gibbs, employment taxes consultant at PSTAX provides examples of some well-being strategies, while considering any associated tax implications
E mployee well-being is now a matter of priority for many organisations, particularly as anxiety and stress levels continue to be a problem post- pandemic. Although restrictions have been relaxed, the impact of Covid-19 and other illnesses have presented challenges for organisations who want to get their workforce back to full strength both physically and mentally. Promoting well-being in the workplace is a strategy that was embraced during the pandemic and continues to grow in importance as employers explore new ways of working. The hybrid working world we’re now entering will require organisations to adopt strategies to maintain team spirit, deal with management at arm’s length and prevent the social isolation of those who continue to work from home. There are many ways an employer can assist its employees to enhance health and well-being. This article will explore some of these and the taxation consequences of providing them. This article includes a general overview of several potential exemptions that may be available. However, please note, advice should always be taken to ensure the terms of any exemption are met in full, and that these will not apply where they’re provided under salary sacrifice arrangements. Counselling services The Chartered Institute of Personnel and Development (CIPD) Health and Well-being at Work Survey for 2021 revealed that 74% of organisations provide counselling services and employee assistance programmes (EAPs) to all employees. This has increased from 52% in 2016. They are of great help to employees who are suffering from mental health issues and anxiety and provide
immediate access to counselling at a time when the National Health Service’s mental health teams are under immense pressure. 74% of organisations provide counselling services and employee assistance programmes to all employees Counselling services provided to an employee will result in a chargeable benefit for tax purposes under general principles; however, an exemption is available in certain circumstances if various conditions are met. The exemption for welfare counselling at Section 210 of the Income Tax (Earnings and Pensions) Act (ITEPA) 2003, and Statutory Instrument 2000 No. 2080 is the basis for the provision of EAPs. The exemption covers areas such as: ● workplace stress ● bereavement ● harassment / bullying at work ● alcohol / drug dependency ● sexual abuse. However, Her Majesty’s Revenue and Customs (HMRC) advises that it’s very tightly drawn, and employers should ensure that services included in an EAP that fall outside the exemption aren’t included (see examples below). The whole EAP and its exemption from tax is put at risk where a service is included that’s outside of the exemption, as there’s no statutory basis for apportionment
of the benefit. If there are additional services being provided that aren’t included in the exemption, they should be separated from the main EAP with a different phone line – or other means of contact – and treated as a taxable benefit for the employees who use that part of the service. There are certain areas that are excluded from the exemption, and counselling offered cannot include any: ● financial advice (other than debt advice) ● tax advice ● legal advice. The main purpose of an employee calling an EAP service must be primarily concerning their mental health and well-being, and not to gain advice on the excluded topics. The service can signpost employees to help but can’t provide specific assistance in those particular areas. All forms of medical treatments were previously excluded from the exemption, but since April 2020, medical treatments that are also counselling services, such as cognitive behavioural therapy and interpersonal therapy, are now covered by the exemption. The final area that can lead to a taxable benefit arising from an EAP is the provision of counselling services to partners and dependents of the employee. To avoid a benefit in kind (BIK) charge arising, there should be no separate phone line for family members and the only face-to-face counselling provided should be couples or family counselling. The Employee Assistance Programme Association UK (EAPA), with assistance from PSTAX, wants to get the welfare counselling exemption widened to include partners and dependents as well as volunteers. We will keep you updated on any progress in this area.
| Professional in Payroll, Pensions and Reward | May 2022 | Issue 80 20
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