Tax exemptions: Employer-reimbursed coronavirus antigen tests and easement for employer-provided cycles exemption

Treasury written statement – made on 17th December 2020.

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Photo of Jesse Norman Jesse Norman The Financial Secretary to the Treasury

Employer-reimbursed coronavirus antigen tests: Exemption from Income Tax and National Insurance contributions

On 9 July 2020, the Government agreed to introduce an income tax exemption and National Insurance contributions (NICs) disregard to ensure that Coronavirus antigen testing provided to employees outside the Government’s national testing scheme will not attract tax and NICs liabilities.

The Government is now introducing a second income tax exemption and NICs disregard, to ensure that employees who purchase their own coronavirus antigen test and are reimbursed by their employer, will not attract tax and NICs liabilities.

The Government recognises the importance of COVID-19 testing. Currently, regular tests are available through the Government testing programme to a wide range of employees, including NHS workers. If an individual is tested through the Government testing programme, no tax or NICs liability will arise.

Under normal rules, the cash reimbursement of a test by an employer to an employee, would constitute earnings, and the amount reimbursed would be subject to income tax and Class 1 NICs as a result. However, the Government introduced NICs regulations - The Social Security Contributions (Disregarded Payments) (Coronavirus) (No. 2) Regulations 2020 (SI 2020/1523) on 14 December and will introduce a tax exemption in the next Finance Bill to ensure that no tax and NICs liabilities arise.

These exemptions will ensure that Income Tax and NICs will not be due on employer-reimbursed antigen tests carried out during the current tax year 2020-21.

Easement for employer-provided cycles exemption

The tax exemption for the employer provision of cycles and cyclist’s safety equipment was introduced to support employers in promoting healthier journeys to work and to encourage green commuting. Many employers offer this in the form of Cycle to Work schemes.

One of the conditions of the exemption is that the cycling equipment provided should be used mainly for qualifying journeys (to or from work or in the course of work).

The Government’s COVID-19 restrictions have required many employees to work from home where possible. Therefore, many existing users of the scheme are not travelling to work and may be unable to meet the condition for qualifying journeys. Under the current application of the rules, these individuals would become liable to an income tax Benefit in Kind charge.

However, the Government will introduce a time limited easement to disapply the condition which states that cycles must be used mainly for qualifying journeys. The easement will apply to existing users and will allow those individuals to continue to benefit from the tax exemption without needing to meet the qualifying journeys condition.

The easement will be available to employees who have joined a scheme and have been provided with a cycle or cycling equipment on or before 20 December 2020. The easement will be in place until 5 April 2022, after which the normal rules of the exemption will apply.

Therefore, employees who have joined a scheme and have been provided with a cycle or cycling equipment on or before 20 December 2020, will be permitted to an easement, and will not have to meet the qualifying journeys condition until 5 April 2022. Employees who join a scheme from 21 December 2020 will need to meet all the normal conditions of the exemption.