During the height of the pandemic, the Government introduced a range of administrative easements and other relaxations to the employment taxes rules in acknowledgement of the exceptional circumstances facing taxpayers.
A number of these have now either expired, or are due to expire in the coming months. It’s important that both employers and employees are aware of these, and the impact they could have on their tax position.
Already gone
A number of COVID easements expired at the end of the tax year on 5 April 2022.
These include the relaxation of the ‘qualifying journeys’ condition for the Cycle to Work scheme, which we discussed in April’s Employer Focus. From 5 April, employees on such schemes will need to meet all of the qualifying conditions to benefit from tax relief, including using the bike at least 50% of the time for commuting.
To reflect the increase in home working during the pandemic, a specific easement was put in place to ensure no income tax or NIC consequences would arise if employers reimbursed employees for buying their own office equipment. This easement also ended on 5 April 2022, meaning that such reimbursements are now likely to be subject to income tax and NICs.
In 2020, HMRC introduced guidance for non-UK resident employees stuck in the UK because of pandemic travel restrictions. These employees would not be taxed on earnings for duties performed in the UK after their planned departure date, provided they were taxed in their home state. This easement ended on 5 April 2022, meaning that for non-UK residents, any days spent working in the UK from 6 April onwards will be treated as days on which they performed duties in the UK.
Finally, two easements surrounding employee share schemes also expired on 5 April:
- The relaxation of the ‘working time requirement’ under the Enterprise Management Incentive (EMI) scheme.
- Allowing employees on furlough or unpaid leave to pause saving into a Save As You Earn (SAYE) scheme for an unlimited period.
Going soon
A further COVID specific easement is due to expire on 30 June 2022.
During the pandemic, where an employee’s work location changed due to COVID restrictions, HMRC said they would disregard this when considering whether or not UK NICs were payable. However, from 1 July 2022, HMRC will consider all such changes to work locations.
If this leads to an employer or employee paying UK NICs whilst working in the EU, they should use the existing forms to apply for a PDA1 certificate.
Staying for another year
One easement which was originally due to expire in April 2022, but has been extended, is the income tax and NIC exemption for employers who pay for, or reimburse the cost of, employee COVID testing.
As reported in April’s Employer Focus this exemption will now be extended until 5 April 2023. This extension is particularly relevant given that universal provision of free lateral flow tests has now ended.