In these uncertain times, many of us are struggling with the social isolation of working from home or the anxiety brought on by global events outside our control. The NHS mental health services are under increasing pressure, sometimes with long waiting lists, so what help can HMRC give you if you decide to pay for these services privately via your business?
If you are a sole trader paying for welfare counselling, then the cost of doing so is not tax deductible, even though it may help you to continue to run your business. However, if you are a director and operate your business as a limited company then you will be treated as an employee and may be able to access tax free welfare counselling, if it is arranged and paid for by the company.
In order for welfare counselling to be exempted from tax, it must be made available to all employees on similar terms, so you cannot make this available to say, only the directors of the company.
HMRC warn in their manuals that ‘the exemption is tightly drawn and there is no intention that all conceivable types of welfare counselling should be exempted from tax’. However, the following types of counselling do fall within the exemption:
- stress;
- problems at work;
- debt problems;
- alcohol and other drug dependency;
- career concerns;
- bereavement;
- equal opportunities;
- ill-health;
- sexual abuse;
- harassment and bullying;
- conduct and discipline; and
- personal relationship difficulties.
Counselling services which are also medical treatments, such as Cognitive Behavioural Therapy or Interpersonal Therapy are also included within the exemption.
Notably, advice on finance, other than debt problems, tax and legal advice and advice on leisure or recreation is not covered by the exemption.
If the employer provided services include a mix of exempt and non-exempt assistance, then this will mean that the cost of the whole package will be taxable as a benefit in kind. To prevent this from happening, it is advisable to consider separating out the two types of service into totally different schemes.