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Tax bill hike for employees tested for Covid

Emma Lunn
Written By:
Emma Lunn

Coronavirus tests offered by employers will be treated as a “benefit in kind” – meaning workers will pay income tax on them.

Chair of the House of Commons Treasury committee Mel Stride has raised concerns about how employees could face a mounting tax bill simply because they have been regularly tested for the virus.

Stride has written to Chancellor Rishi Sunak asking him to look into the matter.

He referred to HMRC guidance published this week which states that Covid tests carried out by a third party – which have been purchased by employers for their staff – are treated as a taxable benefit in kind on the employee.

Benefits in kind are benefits that employees receive from their employers that are not included in their salary.

Each benefit in kind has a cash value assigned, and employees pay income tax on this amount through the PAYE system.

Stride warned that many key workers could be faced with the “perverse incentive of avoiding employer-sponsored tests in order to reduce their tax bill” and warned Sunak that the current policy “risks deterring workers from taking employer-sponsored tests”.

In his letter to the chancellor, Stride wrote: “Given that many employers will require these tests on a regular basis, especially in health care settings but also in many other industries (such as hospitality), the tax bills could soon mount up and this does not seem to be a helpful policy at this time.”