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Wednesday, October 27, 1999 Published at 13:05 GMT

Business: The Economy

Taxing workplace stress

When stress is a job hazard, counselling will not be taxed

The Inland Revenue has decided workplace stress counselling is a "perk" which should be taxed. The BBC's industry correspondent, Stephen Evans, examines the implications.

Stress counselling at work is not an obvious perk of the job - that is, at least, unless you're an Inland Revenue inspector.

[ image: The BBC's Stephen Evans: Problem is identifying cause of stress]
The BBC's Stephen Evans: Problem is identifying cause of stress
The Revenue has now decided that any help given by employers to employees to overcome the pressure of their lives is a "benefit in kind" and is, therefore, subject to income tax.

It likens stress counselling to help provided by employers to alcoholics which is also a taxable "perk".

The decision, though, has upset employers, unions and tax experts, each for different reasons.

The main difficulty is in implementing the rules. The Revenue says that if the stress is caused solely by something that happened at work, then any counselling provided is not a taxable perk.

If, though, the stress might have been caused by something outside work - like a divorce - then the counselling is taxable.

The problem comes in identifying the cause of the stress.

If an ambulance worker at the scene of the Paddington train crash needed counselling immediately after, then there seems to be no problem - the Revenue would say that wasn't a taxable benefit.

Privacy concerns

But what if the stress comes on some years later and if there might be other causes as well as the trauma of attending the accident? The case is harder to call for tax purposes.

The Inland Revenue is currently asking employers who provide stress counselling free to their employees to say whether their workers are suffering for work-related (untaxed) reasons or non-work-related (taxed) reasons.

Employers, understandably, are saying that they don't know - and even if they did that it would not be right for them to pass on the details of their employees' private lives.

Employers argue that they can't be expected to find out what caused their workers' stress. To which the Inland Revenue responds by taxing the employer itself.

If the firm can't say who's getting counselling for non-work stress and who's getting it for work-related stress, then the Revenue puts a lump-sum tax charge on the firm itself.

The difficulties are compounded by what seems to be different approaches by tax inspectors in different parts of the country.

Call for clarification

In some parts, apparently, the inspectors are coming down with a heavy hand; in others, they're being easier.

Tax experts are now asking the Revenue to clarify the position. The Inland Revenue's rules are now published but the outside experts say that the criteria they use simply aren't available.

For its part, the Revenue says simply that it takes each case on its own merits but the rule remains that if an employee is provided with a service free or at below market value, then it's a taxable benefit and the employer is obliged to declare it at the end of each financial year.

In some cases, the taxable benefit will be so small as to be negligible - having a works canteen might be a taxable benefit for staff, for example, but if it's shared between many hundreds of people, the benefit to each one would be too small to be worth taxing.

In other cases, though, the benefit is likely to be real and taxable.

People involved in stress counselling are clearly annoyed.

So are employers who complain that they don't know the rules because they're not clear and it's an unnecessary burden on them as they try to improve the health (and productivity) of their workforces.

Unions aren't happy either, saying ministers have hammered home the message that health at work is important and absenteeism, particularly in the public sector, has to be countered.

The person who looks after health and safety at Unison, the country's biggest union, called the decision to tax stress counselling "daft".

The Revenue replies that it's just implementing the law.

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