Following questioning in the House of Commons, the UK Treasury have granted employer-provided coronavirus tests a tax exemption. This is a relief for workers who have had or will need to have future tests paid for by their employers. 

Regular testing for at-risk workers, and one-off testing for symptomatic people, are key tools in the battle to keep coronavirus transmission rates low and prevent the NHS from being overwhelmed with cases. In some cases this testing is being offered and paid for by employers, raising the question of who would be footing the tax bill.

Employer-Provided Tests Initially Classed As ‘Benefit In Kind’

The initial guidance provided by HMRC stated that employees would be responsible for paying income tax on the value of any coronavirus tests or testing by a third party. It was instructed that tests should be treated as a ‘benefit in kind’ and taxed accordingly. This was a worrying announcement for those who work in industries that have increased exposure and may require frequent testing as it could spell a potentially costly increase to their tax bill. 

By identifying coronavirus testing as a ‘benefit in kind’, this puts coronavirus testing in the same category as company cars, private health insurance and any other non-salary benefits, or ‘perks of the job’, that have a taxable value. Given the importance of testing, the decision to require employees to be charged via PAYE could be seen as unfair and irresponsible. Mel Stride, Treasury Committee chairman, raised this issue in the House of Commons. 

Coronavirus Testing Receives Tax-Exempt Status For Year 20/21

Stride expressed concern that not only would it result in additional costs for employees, but that the additional cost could result in workers avoiding testing altogether. This could have disastrous consequences for the Covid effort by undermining other measures being taken to isolate cases and prevent the spread. Stride urged Chancellor Rishi Sunak to investigate the matter to ensure that the tax rules would be fair for employees and not working to the detriment of public health.

Coronavirus Covid-19 Tests tax exempt

Sunak agreed, leading to a u-turn on the decision being made. The refreshed guidance advises that coronavirus tests and testing are to be exempt from taxation throughout this current tax year. Therefore, employees that have Covid-19 antigen tests provided by their employer will no longer see an increase in their tax bill for each test they receive – spelling a win for employees. Mel Stride expressed his appreciation to the Treasury for their quick response to his concern and for taking a common-sense approach. 

To clarify, this change only affects those who are being tested by third parties at a cost to their employer. The majority of people being tested will do so through the government-funded testing program that the NHS are delivering. Testing accessed through the NHS will continue to be free for all who require them.

For practical, up to date tax advice and first class accounting services, get in touch with Neil Smith Accountancy for a free consultation. We help small businesses across Essex and London, from fledgling start-up enterprises to established businesses; how could we help you?