Workers forced to pay extra tax if employers cover costs of coronavirus tests

'Many of our key workers could be faced with the perverse incentive of avoiding employer-sponsored tests in order to reduce their tax bill'

Workers will have to pay extra tax when an employer is billed for their coronavirus test, under shock Treasury rules.

The practice has been condemned by the Conservative chair of the Treasury committee, who urged Rishi Sunak to think again.

“Many of our key workers could be faced with the perverse incentive of avoiding employer-sponsored tests in order to reduce their tax bill,” Mel Stride said.
 
“This cannot be right. I’ve asked the chancellor to look into this as soon as possible.”

The loophole has emerged in new guidance from HMRC, which states: “Coronavirus (Covid-19) testing kits or tests carried out by a third party which have been purchased by you to provide to your employees, are treated as a taxable benefit in kind on the employee.”

Benefits in kind are those not included in a worker’s salary – which means a cash value will be assigned to the coronavirus test and the employee must pay income tax on that amount through pay-as-you-earn.

Mr Stride added: “Many employees, especially healthcare and hospitality workers, are required to undergo regular coronavirus testing. This new guidance is unclear and will worry a large number of workers.

“If these tests are to be treated as a taxable benefit in kind, the tax bill for workers could soon mount up.”

The controversy was raised in the Commons, where Mr Sunak hinted HMRC would backtrack, telling the committee chairman: “Of course we will look into it very quickly.”

During Treasury questions, the chancellor also faced criticism that more than 1 million self-employed workers had been “left to face crisis alone”, after missing out on government support.

And he was accused of a penny-pinching green investment announcement, falling far short of the multi-billion pound measures unveiled in Germany and France.

But Mr Sunak insisted 95 per cent of self-employed people are receiving help, telling MPs: “It remains the most generous and comprehensive self-employed support scheme.”

And, on green jobs – with homeowners to receive up to £5,000 for energy-saving home improvements – he denied the UK was in the slow lane, in comparison with EU countries.

“We wholeheartedly, on this side of the House, believe in a green revolution and we will provide the capital to make that happen,” the chancellor told MPs.

The Treasury also ruled out calls for a four-day week as part of the Covid-19 recovery, despite growing support from Conservative voters.

“The government believes the best way of dealing with these issues is for workers to look at existing options available for flexible working,” exchequer secretary Kemi Badenoch said.