TAX CLINIC

Employee health-related perks draw taxman’s attention

Employee health-related perks draw the taxman’s attention.

Any perk employers provide to employees will typically be considered a taxable benefit. Recently, the Canada Revenue Agency (CRA) issued two technical interpretations: the first discussed whether employer-subsidized personal training and nutritionist services are taxable employment benefits; and the second dealt with an employer-subsidized weight-managementprogramas part of an overall wellness initiative. Personal training and nutritionist services: According to the CRA, if an employer pays, either fully or partially, for the cost of a personal trainer or nutritionist for its employees, they are considered to have received a taxable benefit unless it can clearly be shown that the employer was the “primary beneficiary” of the services provided by the personal trainer or nutritionist.

The CRA’s view is that it is the employees, rather than the employer, who would usually be regarded as the primary beneficiaries where “the employees become physically healthier and generally better able to perform their duties (e.g., sick less often, less downtime, remain fit for duty) by using the services of a personal trainer or nutritionist.” Weight-management program: In the second scenario, an employer established a “wellness program” for its employees in the hopes of reducing absenteeism, reducing benefit costs and developing a more productive workforce. One of the components of the wellness program was a weightmanagement program that would be delivered by a third party and would be available to all employees. The employer wanted to reimburse a portion of the costs incurred by employees to join the program.

Consistent with its view onpersonal training and nutritionist services, the CRA also concluded that where an employer reimburses an employee for the cost of a weight-management program, the employee would generally be considered to have received a taxable benefit since it’s the employee, not the employer, whowould be the primary beneficiary.

The Income Tax Act contains an exception exempting employerpaid mental or physical health counselling for the employee or his or her family from being a taxable benefit, but in these scenarios, the CRA felt that while there may be a counselling component to the personal training, nutritionist or weight-loss program, the value of such benefit would be difficult to separate from the value of any other benefits received or enjoyed by the employee and, therefore, the counselling exception would not apply.