ATT calls for extension to tax free treatment of employee COVID-19 testing

Coronavirus antigen tests determine whether an individual has an ‘active’ case of coronavirus.¹ While the Government has confirmed that, where an employer pays for or reimburses an employee for an antigen test this will not be treated as a taxable benefit, the exemptions are only temporary and are set to expire on 5 April 2021.²

Without these exemptions, an employer paying for an employee’s test would be providing a benefit equal to the cost of the test. This can lead to income tax and/or national insurance costs for both the employee and employer³ – as well as unwelcome administration tasks for the employer.

Jeremy Coker, President of the ATT, said:

“The Government must extend the very welcome income tax and national insurance exemptions for employer-funded testing until at least 5 April 2022 given the ongoing pandemic. There would be a real public benefit in encouraging employers to support such testing. Key workers in particular should not be hit by tax charges if their employer pays for them to be tested.”

Without an extension to the exemptions, an employer who pays for an employee to be tested after 5 April 2021 so that they can, for example, go into a vulnerable customer’s home would be creating an income tax bill for their employee. In addition, there will be national insurance consequences for the employer and potentially the employee.

Jeremy Coker continued:

“In our Budget representation,⁴ we suggest the Government could go even further, and that there would be a public benefit in introducing a wider-ranging and enduring exception from taxable benefits for employers who fund employee-testing for any highly transmissible disease.”

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Notes for editors

1. In addition to antigen tests there are also antibody tests which are intended to see if an individual has previously had the virus. The exemptions do not extend to these tests and the normal benefit-in-kind rules continue to apply. 

2. There are two exemptions, one for employer-provided tests where the employer pays for the test and one for employer-funded tests where the employee pays and the employer reimburses them after taking the test or provides funds in advance for the test. The details of these exemptions are covered in policy papers published in November and December being, respectively ‘Income Tax and National Insurance contributions exemption for employer-provided coronavirus antigen tests’ and ‘Income Tax and National Insurance contributions exemption for employer-reimbursed coronavirus antigen tests’.

3. The precise tax treatment will depend on whether the employer has paid for the test themselves, or reimbursed their employee for the cost of the test. Where the employer has paid for the test then the employee will pay income tax on an amount equal to the cost to the employer of the test. The employer will have to pay National Insurance Contributions (NICs) on the same value. Where the employer opts to reimburse the employee for the cost of their test, the employee will pay both income tax and NIC on the amount reimbursed, while the employer will have NICs to pay on the amount of the reimbursement.

4. The ATT’s Budget Representation can be found here.