Beverley Gibbs, employment taxes consultant at PSTAX provides examples of some well-being strategies, while considering any associated tax implications
Employee 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.
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.
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:
harassment / bullying at work
alcohol / drug dependency
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)
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.
Employers may choose to assist their employees with healthcare provision, and this can be done in several ways. Generally, the provision of private medical treatment or insurance will be a chargeable benefit for the employee. However, there are some circumstances where an exemption may apply. As always, professional advice should be taken to assess whether any of these exemptions applies to individual employees. The exemptions are detailed below:
1) Healthcare – helping employees to return to work after an injury or sickness
There’s an exemption for medical treatment up to £500 to help an employee return to work. To qualify for the exemption, the employee must have either:
been assessed by a healthcare professional as unfit for work (or will be unfit for work) because of injury or ill health for at least 28 consecutive days
been absent from work due to injury or ill health for at least 28 consecutive days.
Only the cost of the recommended medical treatment is included in the exemption and not any related costs, such as travel. The medical treatment can be recommended by the government’s ‘fit for work’ service or by an employer-arranged occupational health service. The exemption applies, regardless of who arranged and reimbursed or paid for the treatment. If the medical treatment provided includes treatment that isn’t exempt, HMRC advises that a reasonable apportionment of the costs may be made between qualifying and non-qualifying treatment for tax / National Insurance contribution (NIC) purposes.
2) Healthcare – operational risk injuries and occupational diseases
Where an employee’s injury or illness can be shown to be a risk of the employee’s occupation and is caused by something that’s reasonably attributable to the employee’s office or employment and isn’t a risk common to everybody, there may be no chargeable benefit if the treatment is intended to return the employee to the state of health enjoyed before the injury or illness. This is most likely to apply in the emergency
3) Healthcare – eyesight tests and / or the cost of corrective spectacles or contact lenses
This exemption is especially relevant with the increased time spent in front of screens for online meetings and document access. There’s no chargeable benefit for an eyesight test and the cost of corrective glasses and contact lenses relating to display screen equipment (DSE) use. Only the cost of the DSE element of the prescription and basic lenses are exempt. Where the glasses are for general use but include a special prescription for DSE use, the proportion of the cost relating to DSE will be exempt.
4) Healthcare – periodic health screening and medical check-ups
An exemption from a tax charge is available for medical screening / check-ups.
Employees may have in any tax year:
one health-screening assessment (a questionnaire / interview about general health and lifestyle to identify high risk employees who may then be offered a medical check-up), and
one medical check-up (a physical examination by a health professional).
These will be exempt for tax / NICs purposes. However, if the medical check-up is associated with any medical treatment that isn’t exempt, then it isn’t covered by the exemption.
Gyms and gym membership
The benefits of physical activity are a huge contribution to the health and well-being of employees. There are several ways employers can encourage employees to take more exercise and keep fit. Employers can provide a gym, sporting or recreational facilities for their employees. There are several conditions that need to be met for them to be free of tax / NICs. The main one is that the facilities aren’t available to the general public but are available to all your employees.
The payment by an employer of a third-party gym membership for employees is a taxable benefit and should be reported on a P11D, or by payrolling the benefit. Any contribution from the employee will reduce the benefit reportable.
Mindfulness sessions to help with stress and / or anxiety
Many organisations provided mindfulness and other stress relieving sessions to help with anxiety during the pandemic. Most EAPs have these resources for employees to use as and when they need them. Some organisations will have mindfulness training sessions that can be attended by employees either in-person or online. Both the EAP resources and training sessions will be covered by the welfare counselling exemption.
Corporate discounts with third parties
Many organisations provide platforms that have discounts available with third parties for their employees, which may support health and well-being. Some of these platforms are free, which means that it’s unlikely a tax charge will arise. In other cases, the employer may incur a cost – or there’s a definable cost of providing the benefit to the provider – which could result in a BIK charge arising. However, it may be that the BIK is small, and the employer is prepared to meet the tax / NICs charges arising via a pay as you earn settlement agreement (PSA). In some circumstances, it could even qualify as a trivial benefit.
Healthy food in the office
Providing food to employees would normally be a taxable benefit, but there are circumstances where this may be exempt. There’s no tax charge for the provision of discounted or free meals provided by the employer in a subsidised canteen, available to all staff. If an employer can’t provide and run such a facility, the provision of healthy snacks to staff generally, e.g., fruit, could qualify as a trivial benefit.
Check the tax and NI implications
Evidently, there are tax and NIC exemptions that can be used when providing a well-being programme for employees, but care should be taken when implementing any well-being strategies. Professional advice taken beforehand can give the best outcomes for both employees and employers by being tax and NIC efficient.