The Chancellor has scrapped plans for workers to pay tax on coronavirus tests funded by their employers, a move that would have particularly affected frontline workers.
Rishi Sunak said he would exempt the tests from income tax and National Insurance contributions (NICs) after he was warned that doctors and nurses could be hit with mounting bills.
Mel Stride, chairman of the Commons Treasury Committee, said on Wednesday that he was “glad that common sense has prevailed” after pressuring the Chancellor to make the U-turn.
New rules published by HM Revenue & Customs on Monday said that staff should pay tax on Covid-19 tests funded by their bosses because they would be treated as a benefit in kind.
But Mr Sunak, writing to the influential committee the following day, said an exemption would be added for any tests taken in the tax year 2020/21.
The Chancellor @RishiSunak wrote to us last night to say that the Government has reversed its decision to charge employees income tax and NICs on #coronavirus testing, and such tests will now be exempt.— Treasury Committee (@CommonsTreasury) July 8, 2020
Welcoming the U-turn, Chair @MelJStride said "common sense has prevailed". pic.twitter.com/5JwTw7yfEs
“As most workers will already be able to access tests for free through the NHS, we expect this to only impact a small number of individuals,” he said.
“However, given the importance of widespread testing, the Government wants to ensure that all employers who wish to provide testing to their employees can do so without increasing their tax liability.
“We are therefore introducing a new income tax and NICs exemption from income tax for employer-provided Covid-19 antigen tests.”
Mr Stride thanked Mr Sunak for having “reversed this decision so swiftly”.
“It would not have been right to increase the tax bill for workers every time that they had a coronavirus test. I’m glad that common sense has prevailed,” the Tory MP added.