EAPs under tax threat

Employee assistance programmes (EAPs) are under threat of losing their tax-free status.

The services offered under EAPs have traditionally been defined as ‘welfare counselling’ services, which are not liable for tax. This includes help around issues such as stress and bereavement. Financial and legal advice, which are offered by many EAP products, however, fall outside of this definition and the government has indicated it may start taxing such schemes.

A spokesman from HM Revenue and Customs (HMRC) said: “The provision of counselling represents a chargeable benefit, but in certain circumstances welfare counselling provided by an employer for employees is exempt from tax.”

But EAP providers, along with the Employee Assistance Programme Association (EAPA) are arguing that many problems that employees use EAP services for are intertwined, and often issues around finance lead to stress.

Eric Marshall, chairman of the EAPA said: “All EAP services should be treated the same way by HMRC, you simply can’t separate out financial and legal advice.”

The EAPA has until the end of August to respond to the issue.