Covid-19 Tests – Not Taxable!

First published on 08 July 2020 by Alastair
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Following a backlash, HMRC has decided to reverse their decision announced earlier in the week that employees would face a taxable benefit for Covid-19 testing.

In guidance published on Monday, HMRC advised that ‘Coronavirus (Covid-19) testing kits or tests carried out by a third party which have been purchased by you to provide to your employees, are treated as a taxable benefit in kind on the employee.’  This was met significant opposition from the Treasury select committee (among others), who pointed out that a large number of individuals (particularly front-line workers) are subject to regular testing which would create significant tax liabilities if this treatment was applied.

For example, for an employee who is tested weekly, private testing could cost around £7,800 a year. This would mean a taxable benefit of £1,560 for a basic-rate taxpayer and £3,120 for a higher-rate taxpayer.

This may have led to employees considering avoiding or refusing testing by their employer in order not be left out of pocket.  This, of course, goes against the message on testing that governments across the UK are keen to be seen to be delivering.

Thankfully, some common sense has now been applied and a Treasury spokesperson confirmed today that a tax exemption for Covid-19 testing by employers will be introduced and HMRC guidance will be updated to show this shortly.

All of which means that employers can provide tests without worrying that they are creating any extra tax charges for their employees.

Chris Leslie, Tax Senior

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