A blue gloved hand holds a negative covid test in front of a document confirming the result

Final Covid testing easement now expired

16 May, 2023

During the pandemic, a specific easement was introduced to allow employers to pay for, or reimburse the cost of, Covid testing for their employees without any tax consequences for either party. Despite HMRC guidance to the contrary, this easement ended on 5 April 2023, and any employers who are continuing to pay for Covid testing will now need to think about potential tax consequences. The ATT would be interested in hearing from you if you think the current rules may cause tax problems for you or your employees.


The Covid testing easement was introduced during the pandemic as otherwise HMRC’s view was that the provision of a Covid test to an employee was a taxable benefit-in-kind equal to the cost of the test. Now that the easement has ended, this potentially leaves employers with an annoying tax problem if they are continuing to pay for employee testing. Under the current rules, only limited groups of people can access a Covid test for free, including healthcare workers and those either going into hospital or at high risk of becoming seriously ill from Covid.

There are two potential solutions to avoid a potential benefit in kind, although neither are ideal and may not be sufficient depending on the circumstances in which the employer pays for a test.

Trivial benefits

The first potential solution is the trivial benefits rule. Benefits which are considered trivial do not give rise to a benefit in kind for the employee. The basic rules for a benefit to be considered trivial are that:

  • the cost of the benefit, including VAT, does not exceed £50 per employee;
  • the benefit is not cash, or a cash voucher (a voucher which can be exchanged for cash);
  • the benefit is not provided under a salary sacrifice or other contractual arrangement; and
  • the benefit is not provided in recognition of particular past or future services performed by the employee.

This is an all or nothing exemption - if the cost of a benefit exceeds £50 then the full value is taxable under the usual benefit in kind rules. A packet of lateral flow tests is likely to cost well under this limit but a more expensive PCR test could breach it.

There are also potential limits to the trivial benefits rules as sometimes HMRC can seek to treat a series of gifts as related, and look at the total value of similar or related benefits provided to test against the £50 limit. For example, if an employer provided a significant number of test kits to an individual, even if the individual kits cost less than the £50 limit, there is a risk that HMRC could look at the total cost of all the test kits provided to an individual during the tax year to see if it exceeded £50 for the purposes of the trivial benefit rules.  There is also a risk that, if testing is provided frequently, HMRC could argue that they are linked to the employee’s services and therefore do not qualify as a trivial benefit.

PAYE Settlement Agreement (PSA)

An alternative to the trivial benefits, the employer could ask HMRC if they would accept the costs of Covid testing in a PSA. Including the costs in a PSA means that the employer pays all the associated tax costs of the benefit provided. This is good news for the employee, and avoids the needs for a P11D, but can be expensive for the employer as they must pay tax on the value of the benefit after grossing up at the employers highest marginal rate of tax. There is also likely to be an element of administrative burden.

To be included in a PSA, an expense must be minor, irregular or impracticable to otherwise assess on employees. This might be appropriate if, for example, an unvaccinated employee needs a PCR test before visiting Brazil for a work trip, or an employer pays for an employee to receive a test before visiting a vulnerable client. However, if an employer is paying for a regular programme of testing, then, again, there is an argument that a continuing, regular payment might not meet these conditions.


During the pandemic, the ATT made representations to Government about the need to exempt the costs of testing from the benefit in kind rules so that employers and employees did not incur additional tax costs. We were concerned that otherwise tax consequences could deter employers or employees from taking sensible or necessary precautions. Now that the easement has ended, we have not received any calls for it to be further extended. This could be because employers are unware of the changes, or because they feel they will be able to rely on the approaches outlined above to deal with any tax issues.

If there are any employers who are concerned about the potential tax costs of Covid testing from 6 April 2023, we would be interested to hear in what circumstances problems have arisen. Please get in touch with us at [email protected].


This article was originally published on 10 May 2023 as part of our monthly Employer Focus newsletter which covers range of tax and wider topical issues that affect employers. If you would like to subscribe, please contact us.