Welfare counselling services

By Tolley in association with Paul Tew

The following Employment Tax guidance note by Tolley in association with Paul Tew provides comprehensive and up to date tax information covering:

  • Welfare counselling services
  • What is tax exempt counselling?
  • Counselling Services not covered by the tax exemption
  • Determining the conditions for exemption
  • Benefits provided after the employment ends
  • What are other potential reporting requirements to HMRC?

Welfare counselling services, also referred to as Employee Assistance Programmes (EAP), include a range of facilities or treatments available for the benefit of employees. These services have been increasingly offered by employers to help employees in times of difficulty. The provision by an employer of counselling facilities to an employee usually represents a taxable benefit. However, in certain circumstances, welfare counselling provided by an employer for his employees is exempt from income tax.

What is tax exempt counselling?
Welfare counselling

An income tax exemption to cover certain minor benefits is set out in ITEPA 2003, s 210. The statutory tax exemption for welfare counselling is conditional on the benefit being made available to the employer’s employees on generally similar terms, ie a benefit will not qualify for an exemption where it is offered to selected employees only.

There is no legislative intention that all conceivable types of welfare counselling should be exempted from tax. The type of issues the exemption is intended to cover includes:

  • stress or ill health
  • problems at work (including conduct and disciplinary matters)
  • debt problems
  • alcohol and other drug dependency
  • career concerns
  • bereavement
  • equal opportunities
  • ill-health
  • sexual abuse
  • harassment and bullying
  • personal relationship difficulties

All the component parts of a welfare counselling scheme need to be covered by the exemption in order for the entire scheme to be tax exempt.

Outplacement counselling

Outplacement counselling provided to help an employee adjust to the termination of their employment and find new work is fully exempt from income tax, provided the counselling services are generally available to all employees and all the conditions laid out in ITEPA 2003, s 310 are met. See EIM13745 for further guidance.

Counselling Services not covered by the tax exemption

The Income Tax (Benefits in Kind) (Exemption for Welfare Counselling) Regulations 2000, SI 2000/2080 (subscription sensitive) exempts welfare counselling of any kind from an income tax liability with the specific exception of:

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