Income Tax treatment of welfare counselling
Published 16 March 2020
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This publication is available at https://www.gov.uk/government/publications/income-tax-treatment-of-welfare-counselling/income-tax-treatment-of-welfare-counselling
Who is likely to be affected
Employers who provide welfare counselling services, which are also medical treatments, often through an Employee Assistance Programme, and employees who use the employer-provided welfare counselling services.
General description of the measure
This measure will widen the scope of non-taxable Occupational Health services which can be provided by an employer.
The changes to the welfare counselling regulations will mean that the employer provision of counselling services which are also medical treatments, such as Cognitive Behavioural Therapy or Interpersonal Therapy, will no longer be a taxable benefit under the terms of the welfare counselling exemption.
Policy objective
The measure is designed to widen the scope of tax relief available where employers wish to provide Occupational Health support to their employees. The intention is to promote employer support for effective counselling treatment, so employees can receive greater support and enjoy better occupational health.
Background to the measure
The government is committed to improving the wellbeing of the nation and acknowledges the importance of supporting employees with occupational health concerns. No consultation has been held as this is a minor change which is wholly relieving to the taxpayer and employers.
Detailed proposal
Operative date
This measure will have effect from 6 April 2020.
Current law
Employment related benefits given by an employer to an employee are usually chargeable to income tax under Chapter 10, Part 3 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA). However, limited forms of welfare counselling are currently exempt from income tax for the purposes of the employment income parts of ITEPA under the Income Tax (Benefits in Kind) (Exemption for Welfare Counselling) Regulations 2000 (‘the welfare counselling regulations’).
The current exemption is tightly drawn, and it is still not intended for all welfare counselling services to be exempt from tax. Welfare counselling which is currently exempted is counselling of any kind except medical treatment of any kind, advice on finance (other than advice on debt problems), advice on tax, advice on leisure or recreation, or legal advice. In order for welfare counselling to be exempted from tax under the welfare counselling regulations, it must also be made available to an employer’s employees generally on similar terms.
Certain welfare counselling treatments, such as Cognitive Behavioural Therapy would, however, also constitute a medical treatment and are therefore not included as part of the current welfare counselling exemption.
Medical treatments provided by or paid for by an employer are currently exempt from income tax under section 320C ITEPA. Treatments are exempt under this section as long as they are provided in accordance with a recommendation from an occupational health service for the purpose of helping the employee to return to work after a period of sickness absence of at least 28 days, and where the value of the treatment does not exceed £500.
Proposed revisions
The welfare counselling regulations will be amended so that they no longer exclude the provision of counselling services which are also medical treatments, where they are provided to the employee as part of the employer’s welfare counselling services.
This change means that counselling services which are also medical treatments, and which are provided as part of an employer’s welfare counselling service provision are within the scope of the exemption in the welfare counselling regulations and the limits and considerations of s320C ITEPA 2003 no longer need to be considered.
The exemption at s320C ITEPA 2003 will continue to be available to employers for use with all other kinds of recommended medical treatment.
Summary of impacts
Exchequer impact
| 2019 to 2020 | 2020 to 2021 | 2021 to 2022 | 2022 to 2023 | 2023 to 2024 | 2024 to 2025 |
|---|---|---|---|---|---|
| - | negligible | negligible | negligible | negligible | negligible |
This measure is expected to have a negligible impact on the Exchequer.
Economic impact
This measure is not expected to have any significant economic impacts.
Impact on individuals, households and families
This measure is expected to have a positive impact by allowing employees to access specialist counselling treatments as a non-taxable benefit in kind as part of their employer provided welfare counselling services. Customer experience is expected to remain broadly the same as this measure does not change how individuals interact with HMRC.
There is expected to be no impact on family formation, stability or breakdown.
Equalities impacts
This measure will have a positive impact on those people with disabilities. It is not anticipated that there will be impacts for any other groups with protected characteristics.
Impact on business including civil society organisations
This measure is expected to impact employers who provide welfare counselling services.
This measure ensures that employer provision of counselling services which are also medical treatments, such as Cognitive Behavioural Therapy or Interpersonal Therapy, will no longer be a taxable benefit under the terms of the welfare counselling exemption. One-off costs will include familiarisation with this change. There are expected to be no ongoing costs. Ongoing savings for employers could include no longer having to record information relating to medical treatment within their welfare counselling services, and no longer having to submit this information to HMRC. There are expected to be no impacts on civil society organisations unless they provide welfare counselling services in their capacity as an employer.
Customer experience is expected to remain broadly the same as this measure does not significantly change how employers interact with HMRC.
Operational impact (£million) (HMRC or other)
There will be negligible operational impact to HMRC for this change.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will be kept under review through communication with affected taxpayer groups.
Further advice
If you have any questions about this change, contact the employment income policy team by email: employmentincome.policy@hmrc.gov.uk.