Supporting employees through challenging times can have a long-term positive impact on staff loyalty, engagement and performance.
In recent years many businesses have introduced wellbeing policies, and access to additional support to help members of staff during difficult personal or professional periods. If your business provides counselling or an employee assistance programme, it’s helpful to understand how that support is treated for tax.
HMRC has recently updated its guidance with clearer examples of the welfare counselling exemption. The examples now expressly include mental health and menopause support. The rules themselves haven’t changed, but the update might help you to review the cover of any existing arrangements you offer.
When can counselling be provided tax-free?
Qualifying welfare counselling can be offered without an employee tax charge or an employer National Insurance or reporting obligation. The service needs to be available to employees generally and deal with welfare counselling for stress, mental health, bereavement, workplace problems, and menopause support.
Do be aware that there are limits in place. The exemption doesn’t generally cover tax or legal advice, leisure advice, or financial advice other than help with debt problems. Menopause support may fall within the counselling exemption, but that doesn’t mean all menopause-related medical treatment qualifies under it.
What should your business do?
If you use an external provider, check the services which your team can actually access. Some employee assistance programmes combine counselling with other types of advice. If that is the case, it may be necessary to distinguish the qualifying counselling from the other services to establish the right tax treatment. Counselling provided through a salary sacrifice arrangement also falls outside this exemption.
Not sure how your staff support is treated?
A review of your provider’s package and your benefits records can help you spot questions before they become payroll problems. Get in touch with our friendly team if you’d like help checking how the rules apply to the support you currently offer.