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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 has led to HMRC updating the rules regarding the tax treatment of mobile phones such that modern PDA’s are now classed as computers.
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.
The Blackberry and other PDA devices that are becoming available on the
market are causing
problems because these are classified as computers. As the tax
exemption for computers provided to staff was removed from 2006/07, the
provision of a PDA such as a Blackberry will
P11D. This will mean that the employee will be taxed on the cost
to the employer of providing the blackberry and the employer will be subject
to Class 1 A National insurance (currently 12.8%) on the same value.
Older, less advanced, PDA devices such as electronic diaries will continue
to be classed as mobile phones however care should be taken when upgrading
these devices so as not to result in a tax charge. If the company 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.
Employers will have to choose carefully because all the major phone providers supply Blackberries and it is likely that these are available as annual upgrade on relevant contracts. As standard mobile phones are becoming more advanced it is also possible that more phones will become classified as computers in future. Perhaps HMRC may re-examine their interpretation of a mobile phone but this looks unlikely for now.
If you are unsure of the treatment of a particular mobile phone or PDA or indeed any benefits provided to employees we will be happy to assist.