Sunday 25 July 2021 11:00 am

The wellness tax: providing healthy meals and fitness classes for staff should be tax-free for employers

Ally Fekaiki is CEO of wellness tech firm Juno

Over the last 18 months, we’ve heard a lot about the impact of the pandemic on mental health, and with good reason. According to the Office for National Statistics, around 1 in 5 adults experience some form of depression in early 2021 – more than double the number before the pandemic. More than half of adults and over two thirds of young people have reported deteriorating mental health during the lockdowns Britain has experienced

As a country, we should be alarmed, both from a financial and health perspective. Employers will feel the cost of poor mental health, with sick days leading to loss of productivity and therefore revenue. The logical corollary should be that companies are encouraged to invest in their teams’ wellbeing.

And many businesses have gone to great lengths to protect the mental welfare of their employees as much as possible, offering all kinds of pastoral services to help them manage the stresses of the pandemic.

For us, this has meant that over the last 18 months, we have delivered over 400 DIY meal kits, cleaned 300 houses, shipped nearly 600 plants, booked over 100 massages, and organised 800 virtual fitness classes.

Companies should not be penalised for looking after their staff. If only that was true: a twist of fate from HMRC rules means “wellness” products and services, a vital tool, are taxed twice. Wellness is charged as a benefit-in-kind (in other words, it is seen as a financial add-on to the employees salary), rather than a commercial expense that can be charged back. Businesses are then charged VAT on top.

For many companies in a precarious financial predicament, facing further threats with plans to increase national insurance, this acts as a disincentive for offering wellness services to employees. At a time when a large amount of the population are recovering from the mental toll we faced during the pandemic, it defies common sense.

There is another twist of irony that even as Boris Johnson pushes to fight obesity, wellness products are taxed twice. In England alone, poor diet contributes to 64,000 deaths a year and costs the economy £74bn. Last week, Henry Dimbleby, the author of the National Food Strategy warned the UK’s “high obesity rate has been a major factor in the UK’s tragically [COVID] high death rate”.

Encouraging people to lose weight, eat healthy and exercise is harder if they have to pay tax on the meal kits, virtual exercise classes or gym membership benefits given to them through their employer.

Wellness tech companies carry out an important public service. We work with employers to help keep their workforce motivated, stay healthy and offer benefits to help them manage home life – which in turn benefits the wider economy by boosting employee retention and productivity. Our services should not be bound by punitive tax measures that don’t put employee health first.

A workforce’s wellbeing and mental health is as important as work-related training or making sure staff are adequately dressed with the correct safety equipment – two workplace “benefits” that are exempt from tax.

I have no doubt that wellness services will continue to be in high demand as we start returning to the physical office, company bosses are realising no single employee has the same set of needs. Some people may still be nervous about returning to obligatory pub visits and some workplace benefits don’t cater to a generation of workers that want a hyper-personalised wellness offering that matches their needs.

The Government should take a simple step to encourage more generosity on the part of enlightened employers, not less, by overhauling current taxation rules. That way, good employers can continue to take care of their workforce’s well-being and be rewarded with the ability to retain the staff as we navigate the next transition of our post-pandemic economic recovery.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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