A while back, HMRC controversially released guidance suggesting that where a COVID-19 test had been provided by an employer, it would be taxable on the employee as a benefit in kind. After widespread backlash, which could have resulted in reduced take-home pay for employees, the decision was quickly reversed.
The Treasury has now published further guidance along with draft legislation confirming the position.
COVID-19 antigen tests provided by the Government
Where COVID-19 antigen tests are provided by the Government to employers of healthcare workers and other frontline staff, no tax liability arises, and this does not need to be reported as a benefit to HMRC.
COVID-19 antigen tests provided by an employer
Similarly, antigen testing kits provided to an employee and paid for by the employer, outside of the Government’s national testing scheme, will not be subject to tax or national insurance contributions (NIC) and will be treated as an exempt benefit.
COVID-19 antibody tests provided by an employer
The draft legislation does not provide an exemption for antibody tests (i.e. a test which determines whether the individual has historically had coronavirus) paid for and provided by an employer. Such tests will remain taxable and will be subject to income tax and NIC and reportable under the benefit in kind rules.
Timing of the exemption
The legislation applies to any tests provided by an employer between 8 December 2020 and 5 April 2021. HMRC has also confirmed that they will not look to collect income tax or NIC on any tests provided between 6 April 2020 and the date that the legislation takes effect.