CIPD criticises plans to tax employee assistance schemes

HR body the Chartered Institute of Personnel and Development (CIPD) has criticised government plans to tax employee assistance programmes (EAP).

The CIPD said the move by HM Revenue & Customs (HMRC) to tax such programmes would be a retrograde step.

Services offered under an EAP have traditionally been defined as “welfare counselling” and are therefore tax-exempt benefits, but HMRC is now taking a sterner view of the programmes, on the grounds that they can often include financial and legal assistance, said the CIPD.

A CIPD poll of more than 800 employers found 86% of those operating an EAP would consider withdrawing it if it became a taxable benefit.

Charles Cotton, CIPD pay and benefits adviser, explained: “Taxing EAPs just doesn’t make sense. It could destroy the government’s attempts to improve the financial understanding of the population and reduce stress caused by debt. HMRC needs to recognise that EAPs are not usually used by the wealthy for legal and financial advice but by those on lower earnings.

“Splitting the financial and legal elements from the other parts of an EAP would be a headache for providers. If an employee calls a helpline because they are stressed and then wants to talk about their finances and debts, it wouldn’t make sense for the helpline provider to end the conversation because that could be the clinical root of their problem,” Cotton continued.

The CIPD’s annual absence management survey earlier this year found that 31% of organisations operated an EAP as part of their wellbeing strategy.

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