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Employee Covid-19 antigen tests are tax and NI free

A rule that exempts workers from paying income tax on Covid-19 antigen tests purchased by their employers enters force on December 8, the government has confirmed.

25th Nov 2020
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Covid-19 antibody

The legislation has been introduced to make sure that employees who are given a relevant antigen test by their employer, will not be liable to an Income Tax Benefit in Kind (BiKs) charge.

The temporary exemption applies to any relevant Covid-19 antigen test provided by an employer on or after December 8, 2020 until and including, April 5, 2021.

“The government is committed to supporting businesses and individuals through the coronavirus pandemic, and this measure aims to make sure the use of relevant antigen testing procedures by employers are not subject to a tax charge,” HMRC said. “No consultation has been held as this is a minor and temporary change which is wholly relieving.”

In July, the government was forced into a U-turn after initially planning to introduce a taxable benefit in kind when their employer paid for coronavirus testing, reducing take-home pay of any liable worker.

Treasury select committee chair, Mel Stride, said the move was unfair and could discourage workers from getting checked if it meant their tax bills were higher. The outcry forced chancellor Rishi Sunak to relent and reverse the plan.

“Given the importance of widespread testing, the government wants to ensure that all employers who wish to provide testing to their employees can do so without increasing their tax liability,” the chancellor wrote in response. “We are therefore introducing a new income tax and NICs exemption from income tax for employer-provided Covid-19 antigen tests.”

For any relevant tests which were provided earlier in the tax year, before the law enters force, HMRC will exercise its collection and management discretion, and will refrain from collecting any Income Tax or Class 1A National Insurance contributions (NICs) due on the provision of a test.

A policy paper published last week covering the technicalities of the decision.

To minimise the financial and reporting burdens, HMRC said, a new Income Tax exemption will be introduced under section 210 of the Act (power to exempt minor benefits) to make sure that relevant coronavirus antigen tests provided by the employer are exempt from Income Tax.

To be eligible, a relevant coronavirus antigen test is defined as a test which can detect the presence of a viral antigen or viral ribonucleic acid specific to severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2).

The exemption will specifically apply to relevant coronavirus antigen tests only, and does not extend to coronavirus antibody tests, which remain subject to income tax and NIC under benefit-in-kind rules. This is because antibody tests do not work for everyone, as some people who have had the virus do not have antibodies.

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