Assistance programmes may lose tax-exempt status

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Employers may soon find it more expensive to provide Employee Assistance Programmes (EAPs) after government advisors recommended they are stripped of tax relief.

Presenting a report to the Chancellor on the tax treatment of various benefits, the Office for Tax Simplification said that while other benefits such as childcare and cycle-to-work schemes should remain tax exempt, EAPs should lose their relief and be treated as a taxable benefit. The report argued that the administration required for the tax relief was out of proportion to the relatively small sums involved.

A decision by the Chancellor is expected in the budget speech next week.

Responding to the threatened move, the UK Employee Assistance Professionals Association (EAPA) claimed that the report had misinterpreted the true nature of EAPs.

“An Employee Assistance Programme (EAP) is a strategic intervention and valuable organisational tool that addresses team and individual performance and supports wellbeing in the workplace,” said chairman David Smith.

“Given the unique role that EAPs have in the workplace they should not be regarded as employee benefits and therefore should not be classified as such when it comes to taxation or tax relief. In this regard, the UK Employee Assistance Professionals Association believe EAPs should continue to be tax exempt.”

The Chancellor is also said to be considering a new ‘de minimis’ threshold which would mean that benefits would have to be worth more than a certain level – such as £100 or £500 – before any tax relief could be claimed.

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