Employment related income tax exemptions that may be relevant during the COVID-19 crisis

by | Apr 2, 2020

Employer-provided Loans

There is a benefit-in-kind tax exemption for loans from employers to employees up to £10,000. No tax charge arises where the total balance outstanding on all such loans throughout a tax year does not exceed £10,000. A salary advance is treated as a loan for these purposes. 

If a loan is written-off or waived by the employer (rather than being repaid by the employee) the loan becomes taxable earnings at the point it is waived. 

Health-screening and medical check-ups

The provision by an employer to an employee of a maximum of one health-screening assessment and one medical check-up in any year is exempt from tax. 

‘Health-screening assessment’ means an assessment to identify employees who might be at particular risk of ill-health. 

‘Medical check-up’ means a physical examination of the employee by a health professional for (and only for) determining the employee’s state of health. 

Counselling services to redundant employees and welfare counselling services to employees generally

The provision by an employer to an employee of the benefit of counselling services to redundant employees and welfare counselling, where this is made available to all employees generally on similar terms, is exempt from tax. For this purpose welfare counselling does not include:

• any medical treatment

• advice on finance or tax (other than debt counselling)

• advice on leisure or recreation

• legal advice 

Late-night taxis

Where an employer pays for an employee’s taxi for a journey from work to home, this represents a benefit unless four late-night working conditions are satisfied and the number of journeys is no more than 60 a year. 

The late-night conditions that must be satisfied are:

1. The employee is needed to work later than usual and until at least 9pm.

2. Such late-night working occurs irregularly.

3. By the time the employee stops work, either public transport has stopped or it would not be reasonable to expect the employee to use it.

4. The transport provided is by taxi or equivalent road transport. 

The 9pm rule – most restaurant or public house employees usually work later than 9pm and consequently when doing so they do not work later than usual, so they cannot satisfy the first condition. The 9pm rule – this condition is intended to apply when someone is needed, on occasion, to work later than usual and until at least 9pm on an irregular basis. 

Public transport – this condition is met where an employee’s journey home requires taking two or more forms of public transport and one of those has stopped by the time of the journey home. 

Disruption to public transport caused by strikes

Where public transport has been disrupted by strikes or industrial action an employee may incur extra costs travelling to or from their place of work. Where the employer provides reasonable amounts towards the cost or meets the costs directly the employee is entitled to tax relief for the amount paid by their employer. But where an employee spends more on ordinary commuting because of a disruption and the employer does not reimburse that sum, the employee is not entitled to tax relief for the extra expense. 

It is unclear at present whether disruptions to public transport arising as a response to government advice in dealing with the COVID-19 crises will fall to be treated in the same way as above. We expect that government will clarify this point in due course. 

Accommodation

Where an employer pays for or reimburses the cost of accommodation (for example, because an employee needs to self-isolate away from other family members, so cannot stay in their own home), the expense (including substance costs) is taxable. 

However, where an employer pays or reimburses the cost of overnight accommodation and subsistence as part of qualifying business travel (i.e. where the employee is travelling on business and has to stay away from home as a result) the expense is not taxable.  

The above has been adapted from the publication “Employment Taxes: An introductory guide to the tax implications of working from home and other related expenses and benefits” produced by the Chartered Institute of Taxation.  The full guide can be accessed here https://www.tax.org.uk/sites/default/files/200331%20Working%20from%20home%20tax%20reliefs%20and%20exemptions%20guide.pdf

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