January 8, 2021 Covid: Expenses and benefits
Lockdowns, working from home, trading patterns disrupted; there is little doubt that Covid has forced many, if not most, of us to rethink our business model. And despite the arrival of the vaccine signalling the end is in sight, it currently looks as though businesses will have to continue to promote agile and inventive ways of working for a while longer.
Alongside that agility we also have to consider the day-to-day; ensuring that taxes are properly accounted for and paid, that company returns are submitted on time, and that we continue to promote the interests of employees, customers and investors. Over recent months we’ve shared some of that advice; looking at areas such as safe working from home and maintaining a positive dialogue with investors. Now, with the end of the tax year fast approaching, we’re looking at another issue; the treatment of expenses and benefits which have been paid to employees as a result of the Coronavirus.
It’s an area which we touched on in April 2020 in our article ‘Knowing when to defer.’ However it is an area which we feel is worth revisiting, particularly as HMRC updated their advice in respect of tax treatments on 7 January 2021. We’ve picked out a few key areas below but would recommend that companies review the guidance in full or contact us to see how we can help companies to maintain a compliant accounting function.
- Covid testing. Employers who provide antigen testing kits to their employees, either directly or by paying for tests to be carried out by a third party, can do so without attracting Income Tax or Class 1A NI contributions in respect of the expense.
- PPE. If a risk assessment shows that PPE is required then the provision of properly fitting PPE is non-taxable. Similarly if an employer is unable to provide the PPE directly but a risk assessment shows that it is required then the employer must reimburse their employee for any PPE purchased by that employee. Again that reimbursement is non-taxable.
- Fuel costs for voluntary work. Employers may agree to reimburse their employees with the fuel cost of voluntary Covid work, for example delivering medical supplies. This reimbursement is taxable and should be dealt with appropriately depending on whether incurred in a private or company car.
- Company car availability. If an employee has been furloughed or is working from home and they still have access to a company car; that car should be designated as ‘available for private use’ even if it is not being driven. In cases where Covid restrictions hamper the collection of the car by the employer or a third party HMRC will accept the return of keys as evidence that the car is unavailable for private use.
- Working from home expenses. Depending on the circumstances employers are able to reimburse employees for a range of items including office supplies, broadband and office equipment. However before you do so it is worth checking up on what is and isn’t allowed as certain items are treated in different ways depending on circumstances.