Employee Assistance Programme Services Tax statement EAPA
This statement is intended to clarify the view of The UK EAPA concerning the latest challenge to EAP's being exempt from tax.The issue regarding EAP's as a taxable benefit is not a new one but an issue that UK EAPA has been dealing with on a local basis for many years. The issue is attracting greater press currently due to the size of the potential tax bill that has been presented to a client organisation of one of our members. The problem is centred around the vague nature of the ruling regarding Welfare Counselling and the confusion that there is at HMRC regarding the difference between Services such as Legal and Financial which they say - in general terms - are not exempt from taxation and Issues which they say can be dealt with under welfare counselling but clearly have a need to have the provision of Information in the Legal and Financial area such as divorce, work stress, relationships, managing others , harassment & bullying and bereavement.
Due to the fact that the HMRC have not properly clarified what they mean by Legal and Financial and the scope of these Services, it is very much left open to interpretation by local Tax Inspectors about whether EAP's Legal and Financial offerings are indeed taxable. The reality however is that the scope of the Legal and Financial Information offered under an EAP is at such a high level that it is not consistent with a Service that should be taxed. The high level Information and support that is provided under the EAP schemes under the label of Legal and Financial is provided within the context of a Mental Health model and is more consistent with trying to help people cope with the issue, and its impact upon the working and personal life of the employee. This coping involves understanding what to do next as opposed to advising about what stocks and shares to invest in or providing representation in court. To this end there is no monetary benefit from receiving this high-level Information and it is not until they take their next step, which EAP's don't provide, that any monetary benefit could conceivably be derived. EAP's do not provide Legal and Financial Information on a stand-alone basis, they are part of a holistic programme. Any attempt to try and remove this element of the programme would undermine the EAP concept and severely diminish its effectiveness in supporting good mental health in organisations.The UK EAPA would support HMRC in ensuring that executives, and employers do not try to add their Legal and Financial Services into EAP programmes as a way of avoiding taxation as a benefit. In addition The UK EAPA appreciate the need for greater clarity around what EAP's do and do not provide such that guidance for local inspectors can be updated to allow better interpretation of existing legislation.
EAP's are a support to the organisation, its employees and managers as well, all of whom are included in the programme as there is no voluntary level. The UK EAPA believes it can clarify this issue with the Revenue such that it will be clear that there is no monetary benefit to be gained from accessing the programme and we hope to achieve this clarity before the end of 2007. If any of our members find themselves in discussion at a local level on this issue we would ask them to pass on this statement and request time for The UK EAPA to successfully resolve this issue directly with the Revenue and the Treasury centrally.Eric Marshall
Chairman EAPA UK