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Business Matters: Tax plans could push firms into the red

News of government plans to tax one of this country's most
successful employee support programmes could well push
many businesses into the red. David Butler of Close Invoice Finance explains
Business Matters: Tax plans could push firms into the red
EMPLOYEE Assistance Programmes (EAPs) are rather longwindedly defined as 'Counselling and support for staff whose functionality is impaired by stress, domestic or dependency problems'.

Essentially, they are a welfare support mechanism through which trained counsellors can give help and advice to employees who are being affected by any number of problems.

Services under an EAP are currently tax-exempt benefits. However, the reason that HM Revenue & Customs (HMRC) is currently debating whether to scrap the exemption is owing to the fact that EAPs can cover financial and legal assistance.

The key point is whether a proposed taxation of EAPs would lead to employers withdrawing them for their workforce. And, according to numerous industry comments and the results of a highly credible piece of quantitative research, it is.

A report published in recent weeks by the Chartered Institute of Personnel and Development states that of those employers operating EAPs, 86% said they would consider withdrawing them if they became a taxable benefit.

With news that stress in the workplace has reached record levels, with more than 13 million lost days a year to this malaise, the fact that any form of effective employee support could be rendered almost obsolete is almost unthinkable.

Recent figures from the Health and Safety Executive back up the severity of the situation. The data shows the number of days lost through work-related stress, depression and anxiety has doubled during the last decade.

Clearly, employers have a large problem on their hands and the introduction of EAP taxation would probably serve only to increase corporate stress levels and hamper business cashflow and profitability.
In a time when financial stress and cashflow management are large and growing challenges, employers need to be seen to be managing the situation, not only to lessen the negative effect on their business, but also to avoid civil action by employees.

Quite simply, government and HMRC need to recognise that workplace stress continues to be a major setback in corporate efficacy and that employers and employees need all the support possible to combat its effects. Taxation of EAPs will only serve to worsen the problem and is anything but a solution.
1 October 2007


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