12 June 2000 External T.I. 2000-0023905 - EMPLOYEE ASSISTANCE PROGRAM

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues: Are expenses incurred by an employer to provide certain benefits to employees deductible by the employer and are the benefits taxable in the hands of the employees?

Position: A question of fact.

Reasons: Answer depends on whether there is a business, whether the expenses are reasonable and the nature of the benefits to the employees.

XXXXXXXXXX 2000-001679
J. E. Grisé
Attention: XXXXXXXXXX

June 12, 2000

Dear Sirs:

This is in reply to your fax of May 2, 2000, requesting our opinion as to whether a particular employee assistance program could be provided by an employer as a tax-exempt benefit to its employees and whether the expenses relating to such a program would be deductible by the employer.

Since your situation appears to relate to actual proposed transactions, we refer you to our policy in Information Circular 70-6R3, Advance Income Tax Rulings, a copy of which is enclosed for your ease of reference. Paragraph 22 of this circular explains that when a request for a technical interpretation relates to specific proposed transactions, an advance income tax ruling rather than a technical interpretation must be requested. However, we are prepared to provide the following comments which are of a general nature and are not binding on the Agency.

The expenses of an employer may be deducted for income tax purposes provided they are reasonable and laid out to earn income from a business or property. Expenses that fall within these parameters are deductible whether the expenses provide a taxable or a non-taxable benefit to employees.

You are in the process of establishing an employee assistance program which is specifically targeted at health and wellness. The program consists of workshops, counselling, training of "in house" facilitators, providing health-related materials and assisting the company in establishing a health care resource centre. The employee assistance program you are concerned with could include:

• stress management,
• dealing with addictions and habits,
• conflict management and resolution,
• healthy life-style development,
• health hazards in the workplace and at home, and
• understanding the mind-body connection for good health.

The benefit derived by an employee from counselling services in respect of an employee's mental or physical health is excluded from income by reason of subparagraph 6(1)(a)(iv) of the Income Tax Act. Therefore, the benefits provided through employee assistance plans will normally be excluded from income because of this exception. Although counselling services in respect of "conflict management and resolution" may not be in respect of the mental or physical health of an employee, any benefit derived by an employee from such counselling would not likely result in a taxable benefit to the employee.

We hope our comments are helpful.

Yours truly,

John Oulton
for Director
Business and Publications Division
Income Tax Rulings Directorate
Policy and Legislation Branch

Enclosure

??

- 2 -