The employment tax and NIC implications of employer provided coronavirus tests and vaccines

29 January 2021

As many employers will be aware, the provision of medical tests, medical treatment, and immunisations by an employer is generally considered a reportable benefit, meaning that employees are liable to tax, and employers are liable to NIC on the earnings arising when such a benefit is provided.

There are some exceptions to this general rule, for example when an employer provides employees with immunisations against seasonal flu, the benefit arising could be regarded as trivial and exempt from tax and NIC when certain conditions are met. 

There are also potential tax exemptions for employer provided annual health checks, eye tests, medical treatment when an employee is working abroad, and certain medical treatment which enables an employee to return to work, although each of these exemptions comes with limitations and conditions attached. 

For employer provided coronavirus tests the above rules have been temporarily adapted and new rules apply, albeit for a limited period of time. 

What are the new rules?

In July 2020, the government and HMRC updated their position so that any coronavirus tests provided by the government, as part of the national testing scheme, as well as other employer provided antigen tests, would temporarily not be treated as a benefit in kind. So, if an employer:

  • employs healthcare workers and other eligible front-line staff who can get a coronavirus test through the national testing scheme during the current tax year to 5 April 2021; and/or 
  • provides coronavirus antigen testing kits to its employees, outside of the government’s national testing scheme, either directly or by purchasing tests that are carried out by a third party in the current tax year to 5 April 2021; and/or
  • no benefit arises, no income tax nor NIC will be due, and there is no need to report the benefit to HMRC.

Furthermore, employers and their employees will temporarily not be liable to tax or NIC where an employer makes an advance payment to an employee for, or reimburses an employee for the cost of, a coronavirus antigen test. Strictly, for NIC purposes, this temporary measure only applies from 25 January 2021, but for payments for such tests made to employees during the 2020/21 tax year before 25 January 2021, HMRC will refrain from collecting the tax and NIC due.

Are there any limitations?

Yes, there are. 

Firstly, the measures highlighted above only apply to coronavirus antigen tests which determine whether someone has an active case of the coronavirus, and do not extend to coronavirus antibody or other tests which seek to identify whether someone has had the coronavirus before.

The HMRC guidance defines a coronavirus antigen test as a test “which can detect the presence of a viral antigen or viral ribonucleic acid (RNA) specific to severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2)”.

Secondly, these measures are currently only applicable for the tax year to 5 April 2021 and will therefore end on 5 April 2021. This may put a strain on some employers from 6 April 2021 (especially those employing key workers and those in particular industries such as retail and hospitality) who are trying to protect their staff and businesses by requiring employees to get tested regularly or before returning to work, and then meeting the cost.

Without these measures, an employer paying for an employee’s coronavirus antigen test from 6 April 2021 will be providing a benefit or earnings equal to the cost of the test, resulting in tax and/or NIC costs for both the employee and employer, as well as the additional administration associated with reporting the benefits to HMRC.

We along with the professional bodies are therefore calling for HMRC to extend these measures beyond 5 April 2021 given the ongoing pandemic. Watch this space for an update if the position changes.

What about coronavirus vaccines?

Employer provided vaccines are not currently an option but once a vaccine is available commercially, employers might want to obtain and provide these for their staff via a third party. Some employers have already announced their intentions to require employees to be vaccinated. The provision by an employer of such a vaccine would give rise to a benefit in kind, liable to tax and NIC, unless an exemption or similar measure applied and provided a different outcome.

At present, the only existing tax and NIC exemption that might be relevant here is the trivial benefits exemption (see our previous article ‘Applying the trivial benefit in kind exemption’ ). However, HMRC’s previous guidance on trivial benefits before the trivial benefit exemption was introduced on 6 April 2016 states that only seasonal flu injections can be regarded as trivial, and no other sort of medical treatment or immunisation.  We will have to wait and see if HMRC update their guidance on the use of the trivial benefit exemption for coronavirus vaccines when they become commercially available. The use of the exemption may, in any event, depend on the cost of such a vaccine and whether this costs more than £50.

It is therefore currently unclear whether an exemption or similar measure covering employer provided coronavirus vaccinations will arrive in the future. Hopefully, it will.

We can help

If you have any questions or concerns about the above, please contact Lee Knight or Susan Ball