ATT welcomes extension to tax free employee COVID-19 testing
The Association of Taxation Technicians (ATT) welcomes the announcement in today’s Budget (3 March) that tax exemptions for employer-funded coronavirus antigen tests will be extended to 5 April 2022.1 The ATT would like the Chancellor to go further to remove the tax barriers for employer-testing for any other similar infectious diseases.
Coronavirus antigen tests determine whether an individual has an ‘active’ case of coronavirus.2 Without the specific exemptions which were extended today, an employer paying for an employee’s test would be considered to be providing a taxable benefit equal to the cost of the test. This could lead to income tax and/or national insurance costs for both the employee and employer3 – as well as unwelcome administration burdens for the employer.
Jeremy Coker, President of the ATT, said:
“We are pleased that the Government is extending the income tax and national insurance exemptions for employer-funded COVID-19 testing until at least 5 April 2022. There is a big public benefit in encouraging employers to support such testing. Key workers especially should not be hit by tax charges if their employer pays for them to be tested.
“We would like to see the Government go further to introduce a wide-ranging and enduring tax exemption for employer provided testing in respect of infectious diseases like COVID-19. Health experts have warned that this may not be the last pandemic; and planning ahead in this way would reduce the need for future emergency provisions to avoid unintended tax consequences for employers who are simply trying to do the right thing.”
Notes for editors
1. The policy paper, confirming the extension was published 3 March 2021.
2. 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.
3. Once the exemptions expire, the tax treatment of providing a test will depend on whether the employer pays for a test directly, or reimburses their employee for the cost of a test. Where the employer pays for a test then the employee will pay income tax on an amount equal to the cost to the employer of the test. For a test costing, say, £100 this would be £20 for a basic rate tax-payer and £40 for a higher rate taxpayer. The employer will also have to pay National Insurance Contributions (NICs) on the same value – adding a further £13.80 to their costs. 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.