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ICAEW calls for greater clarity on taxation of COVID test costs

10 February: ICAEW’s Tax Faculty has urged HMRC to confirm whether coronavirus antigen tests paid for by employers will continue to be exempt from income tax and national insurance after 5 April, and to clarify guidance on the difference between antigen tests and antibody tests which are not exempt.

Published as ICAEW REP 14/21, the Tax Faculty has written to HMRC asking for clarification of the ongoing tax treatment of COVID antigen tests where employers pay staff to take the tests, either in advance of the test or as a reimbursement.

HMRC guidance states that employers and employees will not be liable for any income tax or national insurance contributions (NIC) on the costs of the test. The guidance does not state an end date for this exemption.

In December, regulations were laid confirming that tests provided by employers will be exempt from 8 December 2020 until 5 April 2021, while a government announcement concerning reimbursing employees for such tests confirmed that legislation would be introduced to provide a temporary income tax exemption and NIC disregard from 25 January 2021 until 5 April 2021. The announcement also stated that HMRC would use its use its collection and management powers to not collect any income tax and NIC due on test costs reimbursed from 6 April 2020.

The Tax Faculty is now asking for HMRC to clarify the approach after 5 April. Asking whether new legislation will be created to extend the exemption or whether it will fall on HMRC to use its collection and management powers.

The faculty also urges HMRC to update its guidance in line with the legislation and clarify that it is only antigen tests (those that test whether an individual has the coronavirus) and not antibody tests (those that check whether an individual has had coronavirus in the past) that are exempt