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John M Taylor & Co | Accountants Paisley/Taxation/Vat Returns/Business Start Ups/Sage/Payroll/Bookkeeping

Employer Provided Mobile Phones

As technology has evolved, the mobile phone has moved from simply being a portable phone to the latest editions being more like a computer.  The latest Blackberry models are the most sophisticated Personal Digital Assistants (PDA) available.  While the primary function of the Blackberry is a mobile phone it is also capable of Email and Instant Messaging.  This led to HMRC updating their rules regarding the tax treatment of mobile phones such that modern PDA’s were classed as computers rather than mobile phones.

The current rules on mobile phones state that an employer can provide an employee with one mobile phone, including line rental, for both business and private use without any tax implications provided the contract is in the employers name and paid directly by the employer.  HMRC’s definition of a mobile phone now covers anything that may be used to gain access to, or the use of, a public electronic communications service and also includes equipment installed in a car.  Employees can have more than one SIM card e.g. one for the handset and one for their cars hands free kit and, provided the phone number is the same for both, it is still classed as a single phone connection.

Blackberries, Iphones and other PDA devices that are now available on the market were causing problems because HMRC insisted that they should be be classified as computers and not mobile phones.  As the tax exemption for computers provided to staff was removed from 2006/07, the provision of a PDA such as a Blackberry had to be treated as a benefit in kind and reported on a P11D form each year resulting in many people paying tax for the use of their company smartphone

In early 2012, as a result of advances in mobile telephone technology and particularly in light of the widespread use of smartphones, HMRC finally relented and confirmed that it now accepted that smartphones should be classed as mobile telephones for P11D purposes. As a result, employees who are provided with a smartphone by their employer will no longer be subject to a taxable benefit in kind. It is also possible that, should these employees have been taxed on a benefit in kind over the last four years, a claim could be made for a refund of any tax suffered in respect of the benefit in kind assessed on their smartphone.

Older, less advanced, PDA devices such as electronic diaries will continue to be classed as computers and therefore continue to attract a tax charge due to its tax treatment as a computer. However, if an employer provides a new Blackberry or any other PDA device to employees for
business purposes only then there will be no taxable benefit as long as it can be proved the private use is insignificant.

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