04 Dec 2007 - 11:48: EAP's as a taxable benefit: Update
Barry Winbolt, Head of Training and Development (PPC) and Eric Marshall, Finance Director (PPC) and Chairman of EAPA - met with HMRC in London last week to discuss the issue of EAPs being viewed as a taxable benefit. The key discussion focused on the issue of Legal and Financial elements of EAP services being viewed as taxable services.
Eric Marshall said of the meeting: “After putting our case we were able to convince them that the legal and financial elements were not a service that any monetary benefit could be gained and should therefore not be taxable. We emphasised the point that these elements were delivered within a mental health model which was aimed at reducing the anxiety of the individual by quantifying the issue and signposting them to a resource that could help them address the specific issue.
They agreed that if this was what constituted the legal and financial services then there was definitely a case for including these within the exemption. I suggested that EAPA work with HMRC to draw up a framework to clarify how an EAP should be delivered to comply with the existing exemption and this framework be used by EAPA to give guidance to its members and HMRC use this to give guidance to local inspectors when assessing EAPs for taxation purposes. They believed this to be useful so the following steps will occur;
1) HMRC will draft outline guidelines
2) EAPA will review these and make adjustments to ensure they are applicable to EAP providers and consistent with what EAPA will be defining as a core EAP.
3) A follow-up meeting is to be scheduled to review the final draft and iron out any final points.
4) An enhancement of the current exemption is to be released to cover EAPs.
Of greatest concern however is their view that an EAP that is set up specifically for dependants would be taxable - they said they knew of a large provider that had a separate line for dependants. We pushed for clarity on this saying that home issues can affect an employee so dependants should be covered, however, they pointed out that the exemption issued in 2000 only specifies employees and therefore excludes dependants. On explaining the point further they said that their main concern was when a provider makes a separate line available to dependants - as opposed to an employee raising issues associated with their dependants, which is a technical point which we can address with better positioning of our product. This will be best done when we have sight of the draft enhancement of the guidelines.”
This was a very positive and productive meeting for PPC and EAPA, with every chance of a successful conclusion. PPC and HMRC will re-convene in the New Year when further discussions will be had, ultimately resulting in an agreeable decision for both parties.