In an
unusually fast-moving development, Chancellor Sunak has confirmed that
employer-provided coronavirus tests will be exempt from income tax and NICs for
the tax year 2020/21.
HMRC had
recently updated its guidance How to treat certain expenses and
benefits provided to employees during coronavirus (Covid-19) to cover the different tax
treatment of coronavirus tests and items of PPE provided by employers to
employees. The guidance confirmed that coronavirus testing kits, and tests carried out by a third party, purchased by an employer and provided to its employees, would be treated as a taxable benefit in kind on the employee. The guidance did not mention frontline health and social care staff or other employees likely to need tests on a regular basis.
In a letter to the chancellor, Mel Stride, chair of the Treasury
Select Committee, urged the government to reconsider, noting that the policy
‘risks deterring workers from taking employer-sponsored tests’ and that many of
those affected will be in frontline jobs in hospitals and other similar
settings, and it seems wrong that a disproportionate tax burden should fall on
them at this time’.
Following the
intervention, the section on coronavirus tests was removed from HMRC’s guidance
on the morning of 8 July, suggesting a possible change of view.
In reply to Mr
Stride’s letter, the chancellor confirmed the change: ‘given the importance of
widespread testing, the government wants to ensure that all employers who wish
to provide testing to their employees can do so without increasing their tax
liability. We are therefore introducing a new income tax and NICs exemption for
employer-provided Covid-19 antigen tests. This will be in effect for any tests
which have taken place during the current tax year 2020/21. HMRC will amend their guidance as soon as possible to reflect this change.’
The treatment
of PPE is less controversial. Where an employer’s risk assessment shows that
PPE is required in the workplace, the PPE must be provided by the employer free
of charge. Such provision is not a taxable benefit. If the employer is unable
to provide necessary PPE, it must reimburse the actual expenses of employees
who purchase the PPE directly. Again this is non-taxable on the employee.
This report has been updated to reflect the chancellor's subsequent confirmation of the exemption.
In an
unusually fast-moving development, Chancellor Sunak has confirmed that
employer-provided coronavirus tests will be exempt from income tax and NICs for
the tax year 2020/21.
HMRC had
recently updated its guidance How to treat certain expenses and
benefits provided to employees during coronavirus (Covid-19) to cover the different tax
treatment of coronavirus tests and items of PPE provided by employers to
employees. The guidance confirmed that coronavirus testing kits, and tests carried out by a third party, purchased by an employer and provided to its employees, would be treated as a taxable benefit in kind on the employee. The guidance did not mention frontline health and social care staff or other employees likely to need tests on a regular basis.
In a letter to the chancellor, Mel Stride, chair of the Treasury
Select Committee, urged the government to reconsider, noting that the policy
‘risks deterring workers from taking employer-sponsored tests’ and that many of
those affected will be in frontline jobs in hospitals and other similar
settings, and it seems wrong that a disproportionate tax burden should fall on
them at this time’.
Following the
intervention, the section on coronavirus tests was removed from HMRC’s guidance
on the morning of 8 July, suggesting a possible change of view.
In reply to Mr
Stride’s letter, the chancellor confirmed the change: ‘given the importance of
widespread testing, the government wants to ensure that all employers who wish
to provide testing to their employees can do so without increasing their tax
liability. We are therefore introducing a new income tax and NICs exemption for
employer-provided Covid-19 antigen tests. This will be in effect for any tests
which have taken place during the current tax year 2020/21. HMRC will amend their guidance as soon as possible to reflect this change.’
The treatment
of PPE is less controversial. Where an employer’s risk assessment shows that
PPE is required in the workplace, the PPE must be provided by the employer free
of charge. Such provision is not a taxable benefit. If the employer is unable
to provide necessary PPE, it must reimburse the actual expenses of employees
who purchase the PPE directly. Again this is non-taxable on the employee.
This report has been updated to reflect the chancellor's subsequent confirmation of the exemption.
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