This guidance was updated on 19th January 2021 on .gov.uk and is about Income Tax treatment only. National Insurance contributions treatment may vary depending on the individual benefit or expense.
Coronavirus (COVID-19) tests
Coronavirus tests provided by the government, as part of its national testing scheme, are not treated as a benefit in kind for tax purposes. If you employ healthcare workers and other eligible front-line staff who get a test through this programme, if you are providing testing kits to your employees, either directly or by purchasing tests that are carried out by a third party, or where an employee receives money from their employer for obtaining a test, employers and their employees will not be liable to any Income Tax and you do not need to report a benefit to HMRC.
Personal Protective Equipment (PPE)
If employees are working in an environment where the risk of transmission is very high, and a risk assessment shows that PPE is required, then employers must provide this PPE to employees free of charge. Any PPE provided must fit properly. The provision of PPE to employees is non-taxable.
If an employee requires PPE to carry out their role and the employer is unable to provide this, the employer must reimburse the actual expenses of employees who purchase PPE themselves. This is non-taxable and employees cannot claim tax relief on these expenses from HMRC.
Living accommodation
If your employee is working at a permanent workplace
If you’re providing living accommodation for an employee working at a permanent workplace because of coronavirus, the cost will be taxable. If an exemption applies, for example, if your employee is a warden of a sheltered housing scheme and is living at the premises, where they are on call outside normal working hours, there will be no tax charge.
If your employee is working at a temporary workplace (for less than 24 months)
Tax relief is available for your employees who are provided with living accommodation when working at a temporary workplace because of coronavirus. You should report the cost of providing the accommodation on a P11D as normal, even if the value of the benefit is nil.
Lodging expenses
If your employee cannot return home because of coronavirus you may agree to reimburse their subsistence expenses and lodging expenses, for example if they stay in a hotel room. These are taxable and can be reported through a PAYE Settlement Agreement.
Volunteer fuel and mileage costs
Employees using company cars
You may agree to refund the fuel costs of your employees carrying out volunteer work related to coronavirus, for example, delivering medical supplies including PPE.
These refunds are a benefit and you may settle any tax contributions on your employee’s behalf by reporting through a PAYE Settlement Agreement.
You may also agree to fund the cost of fuel for volunteer mileage related to coronavirus. Volunteer mileage should not be taken into account for the purposes of the car fuel benefit charge for company cars.
Employees using private cars
If your employee uses their own car to volunteer you can refund them up to the level of the approved mileage allowance rate. This is taxable and should be reported through a PAYE Settlement Agreement as a coronavirus related benefit. If you pay your employee less than the approved mileage allowance rate they cannot claim mileage allowance relief.
Paying or refunding transport costs
If you pay or refund your employee the cost of transport from work to home, this is considered to be a benefit. This is because journeys between an employee’s workplace and home are private journeys.
In some circumstances there is an exemption from paying tax on this benefit. For this to happen, all of the following 4 conditions must be met:
- the employee has to work later than usual, and until at least 9pm
- this happens irregularly
- by the time the employee finishes work, either:
- public transport has stopped
- it would not be reasonable to expect them to use public transport
- the transport is by taxi or similar road transport
Your employees may regularly travel to work in a car with one or more other employees using a car-sharing arrangement. If this arrangement stops because of unforeseen and exceptional circumstances, which are coronavirus related, and you provide transport or reimbursement of the expense of transport from your employee’s home to workplace, this may also be exempt.
The total number of exempt journeys cannot exceed 60 journeys in a tax year. This is a single limit that applies to the late-night journeys and the failure of any car-sharing arrangement, together.
If these requirements are not met, free or subsidised transport is taxable and should be reported through a PAYE Settlement Agreement as a coronavirus related benefit.
Paying travel and subsistence expenses for employees travelling to temporary workplaces
If your employee was furloughed when they were travelling to a temporary workplace, the period of furlough is part of that period of continuous work. A period of working from home will also be part of the period of continuous work.
However the workplace stops being temporary from the date that attendance there is expected to be more than 24 months. Tax contributions will then become liable on any payments of travel and subsistence expenses.
Free or subsidised meals
You do not have to report anything to HMRC or pay tax if you offer all your employees:
- free or subsidised meals of a reasonable value at a workplace canteen
- vouchers that cover the cost of buying these meals
If you provide other vouchers, cash allowances or employee accounts, this counts as earnings, for example:
- vouchers that can be exchanged for either food or cash
- cash allowances for meals
- top-up payments to an employee’s account for workplace food and drink using a card or PIN system
For these costs, you must:
- add the amount to your employee’s other earnings
- deduct and pay PAYE tax through payroll
Company car ‘availability’
Your employee may have been furloughed or working from home, because of coronavirus, and provided with a company car which they still have. You should treat the car as being made ‘available for private use’ during this period even if your employee is:
- instructed to not use the car
- asked to take and keep a photographic image of the mileage both before and after a period of furlough
- unable to physically to return the car or the car cannot be collected from the employee
Where restrictions on movement applies because of coronavirus and prevents the car from being handed back or collected, HMRC will accept that a company car is unavailable in the following circumstances:
- where the contract has terminated – from the date that the car keys (including tabs or fobs) are returned to the employer or to a third party as instructed by the employer
- where the contract has not been terminated – after 30 consecutive days from the date that the car keys (including tabs or fobs) are returned to the employer or to a third party as instructed by the employer
The return of keys means that a car cannot be driven in any circumstances even if it is still in the possession of your employee.
Salary sacrifice
Changes in circumstances because of coronavirus are accepted as a lifestyle change which allows salary sacrifice arrangements to be reviewed. If your employee chooses to amend a salary sacrifice arrangement because of coronavirus, you must make sure the change is reflected in the terms and conditions of their employment.
The rules on salary sacrifice changed in April 2017 and for most arrangements entered into before 6 April 2017, these new benefit valuation rules now apply.
An arrangement is not regarded as being varied if the variation of the arrangement is only directly in connection with coronavirus.
Employer provided loans
A salary advance or loan to help your employee at a time of hardship counts as an employment-related loan. Loans provided with a value less than £10,000 in a tax year are non-taxable.
Employees working from home
Employers must check which expenses are taxable if your employee works from home because of coronavirus.
How to report to HMRC
Any expenses or benefits which are related to coronavirus can be reported on your PAYE Settlement Agreement. If you are currently payrolling benefits in kind, you may continue to report expenses and benefits through your payroll as long as you’ve registered with HMRC before the start of the tax year (6 April). You may also continue to report expenses and benefits through P11D returns.
HMRC expects all P11D and P11D(b) returns to be completed online by 6 July 2020 for the tax year 2019 to 2020, paper options are available for employers unable to file online.
PLEASE NOTE: this is a summary and full rules and regulations are set out on .gov.uk. If any of the above might apply to you please get full details to ensure that you meet all regulations.