Employee counselling added to non-taxable benefit list

Specialist counselling, such as cognitive behavioural therapy, is to be added to the list of non-taxable occupational health services provided by employers, in a bid to support improvements in individuals’ health

The measure, which comes into effect on 6 April, will allow employees to access specialist counselling treatments as a non-taxable benefit in kind as part of their employer provided welfare counselling service.

At present limited forms of welfare counselling are currently exempt from income tax for the purposes of the employment income parts of Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) under the Income Tax (Benefits in Kind) (Exemption for Welfare Counselling) Regulations 2000.

The current exemption is tightly drawn, and HMRC says 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. This includes advice on finance (other than advice on debt problems), advice on tax, advice on leisure or recreation, or legal advice.

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.

Now 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 options such as cognitive behavioural therapy are within the scope of the exemption in the welfare counselling regulations and the limits and considerations of s320C Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) no longer need to be considered.

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.

Income Tax treatment of welfare counselling 

Average: 5 (1 vote)