Welfare counselling exemption now covers mental health, menopause support

Employers can provide mental-health support and non-medical menopause support through a tax-exempt welfare counselling scheme.GOV HMRC's Employment Income Manual list of subjects covered by the welfare-counselling exemption now reads "Ill-health, including mental health support"GOV and adds a separate "Menopause Support (but not medical treatment)" categoryGOV alongside stress, problems at work, debt problems, alcohol and drug dependency, career concerns, bereavement, equal opportunities, sexual abuse, harassment and bullying, conduct and discipline and personal relationship difficulties.

The exemption is tightly drawn. Welfare counselling provided by an employer for employees is exemptGOV, but counselling that is advice on finance other than debt problems, advice on tax, advice on leisure or recreation, or legal advice remains outside itGOV. The list is illustrative of the intended scope, not an invitation to treat every conceivable form of counselling as exempt. Employer-provided counselling that is also medical treatment is within the exemption only as part of welfare counselling services.GOV Within that same exemption, counselling that is also medical treatment has been included since 6 April 2020GOV: services such as Cognitive Behavioural Therapy or Interpersonal Therapy provided through the employer's welfare counselling are not a taxable benefitGOV, because the 2020 amendment of the Income Tax (Benefits in Kind) (Exemption for Welfare Counselling) Regulations 2000 removed the former blanket exclusion of medical treatmentLegislation.

The way a scheme is structured decides whether the exemption survives. Where welfare counselling services, sometimes called Employee Assistance Programmes, combine facilities inside and outside the exemption, strictly none of the services is exemptGOV because the exemption provides no basis for apportionmentGOV. Every component must be covered for the programme to be exempt from tax and National Insurance contributions.GOV Where some services clearly qualify and others clearly do not, the qualifying and non-qualifying services should be separated, if possible into entirely separate schemes, so one is exempt and use of the other is a benefit. Where separation is impossible but the programme consists substantially of qualifying facilities with a not significant non-qualifying element, and the boundary is genuinely hard to draw, a common-sense view applies.

The same boundary approach governs legal information. Legal advice as such is excludedGOV, but information given in the course of counselling for an anxiety-causing problem covered by the exemption, for example debt linked to dependency spilling into mortgage arrears discussed in one call, may be accepted as within the exemption depending on the factsGOV. A contact made specifically to obtain legal advice, and any referral for specific bespoke legal advice from in-house lawyers or an outside practice, is outside it.GOV HMRC has agreed guidelines with the UK Employee Assistance Professionals Association on legal information within welfare counselling, and the principles may be applied to any employee programme, not only members' schemes.

Services for dependants and household members remain outside the exemptionGOV, which covers only the employeeGOV. Limited dependent involvement does not break a scheme only within narrow limits: no separate helpline for a spouse, partner or dependants, no face-to-face counselling for them alone though couple or family counselling is permitted, and no access for them to the legal-information component.GOV Separate HMRC guidance covers recommended medical treatment to help an employee return to work and health screening, check-ups and eye tests.

Legal basis: Income Tax (Earnings and Pensions) Act 2003, section 210Legislation; Income Tax (Benefits in Kind) (Exemption for Welfare Counselling) Regulations 2000 (S.I. 2000/2080) as amended by S.I. 2020/291Legislation with effect from 6 April 2020Legislation.