A new update to the regulations have provided a temporary income tax exemption to ensure employees provided with antigen tests (for COVID-19) by their employer, or reimbursed for the costs of such test, are not subject to any tax or NIC charge.
The provision of a coronavirus antigen test by an employer or a reimbursement of its costs, does not currently fit into the existing exemptions. As testing would in most instances be expected to be repeating and the benefit cost would exceed £50, the exemption for trivial benefits would not apply where the employer pays the cost directly. Previously if there had been a reimbursement of the cost, the employer would need to report the reimbursement as other earnings and deduct and pay PAYE tax and Class 1 NIC through payroll.
Therefore, 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. A new NIC disregard for Class 1 and Class 1A NIC will also be introduced under section 3 and 10 of the Social Security Contributions and Benefits Act 1992 (reimbursements for antigen tests disregarded for NIC purposes).
The exemption will apply to any relevant coronavirus antigen test provided by an employer, on or after 8 December 2020, until and including, 5 April 2021. Where the cost is reimbursed by the employer, the measure will have effect from 25 January 2021 until 5 April 2021.
For any tests provided or reimbursed earlier in the tax year, HMRC will exercise its collection and management discretion, and will not collect income tax and National Insurance Contributions (NICs) otherwise due.
The exemption will specifically apply to relevant coronavirus antigen tests only, and does not extend to coronavirus antibody tests.
To be eligible for the exemption, 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).
As required by s210(2) of the Act, the exemption provided for in this instrument will be conditional on the benefit of any provision in respect of relevant coronavirus antigen tests being made available to all of an employer’s employees generally on similar terms.
There are two main types of tests – viral testing and antibody testing. Viral testing tests look to detect viral RNA (genetic information) or antigens (proteins), suggesting current infection. Antibodies, on the other hand, are part of the immune system and can take months to develop, suggesting previous exposure.
This measure is designed to minimise the financial burdens on employees, and the NIC liability and reporting requirements on employers who provide a relevant coronavirus antigen test or reimburse an employee for the cost.
For more information, please contact Caroline Harwood or your usual Crowe contact.