COVID-19: PPE for employees not taxable, but some tests may not be exempt
10 July: HMRC has confirmed that equipment to protect employees from coronavirus is non-taxable, but reissued guidance suggests that tests purchased by staff and reimbursed by employers may be subject to tax.
Since 6 July HMRC has issued, withdrawn and reissued guidance on the tax treatment of coronavirus tests for employees, but further clarity is still needed according to ICAEW’s Tax Faculty.
On 6 July HMRC issued guidance that coronavirus tests provided to employees were to be treated as a taxable benefit in kind. This was promptly withdrawn on the evening of 7 July after interventions from the Chair of the Treasury Select Committee who described the policy as “unhelpful” in a letter to the Chancellor and warned that it risked “deterring workers from taking employer sponsored tests”.
On 9 July HMRC published new guidance on employer-provided COVID-19 tests that states: “If you’re providing testing kits to your employees, outside of the government’s national testing scheme, either directly or by purchasing tests that are carried out by a third party, no income tax or Class 1A national insurance contributions will be due.”
According to the Tax Faculty the wording is silent on the tax treatment of cases where employers reimburse employees for test costs incurred. The Faculty described the new guidance as 'unclear' and said that employers may have to wait for the final legislation for clarity.
HMRC’s guidance does, however, confirm that in certain circumstances the provision by employers of PPE is not a taxable benefit. It states: “If your employees are working in a situation where the risk of coronavirus transmission is very high, and your risk assessment shows that PPE is required, then you must provide this PPE to your employees free of charge. Any PPE you provide must fit properly. The provision of PPE to your employees is non-taxable.
“If your employee requires PPE to carry out their role and you are unable to provide this, you must reimburse the actual expenses of employees who purchase PPE themselves. This is non-taxable and employees cannot claim tax relief on these expenses from HMRC.”
- HMRC’s guidance How to treat certain expenses and benefits provided to employees during coronavirus.
- Keep up to date by visiting ICAEW’s coronavirus hub and the coronavirus and tax webpage.