Taxation of employment income during nationally significant disasters or emergencies

The measure

The Treasury will gain new powers, under ministerial direction, to temporarily modify the taxation of employment income in the event of a nationally significant disaster or emergency. This will enable, for example, the exemption of certain benefits in kind from income tax, the exemption from income tax of certain reimbursements or relief for particular expenses. 

The measure can only be used in such a way that provides relief to taxpayers and cannot be used to implement a tax charge. Any modification made under the new powers will also be time-limited to a maximum of two tax years.  


Who will be affected?

Employees who receive specified reimbursements or benefits in kind from their employers during a nationally significant disaster or emergency, as determined by the Treasury.


When will the measure come into effect?

The new powers will come into force as soon as Royal Assent is given to Finance Bill 2021-22.

Our view

While similar exemptions have been made for certain benefits provided in relation to coronavirus (for example, the exemption of coronavirus tests provided to employees), such exemptions currently require primary legislation in most cases and are therefore difficult to implement quickly. 

Employers will welcome the fact that this provision gives the government more flexibility to act quickly to provide tax reliefs and exemptions in the event of a national emergency such as the COVID-19 pandemic.