Company smartphones could attract less tax
There is potentially good news for any employers who provide their employees with smartphones.
Up until 20th February, HMRC’s guidance was that a smartphone, such as an iPhone or BlackBerry, didn’t count as a mobile phone for taxable benefit purposes, but as a computer.
Why would that matter?
An employer can provide an employee with one company mobile phone, which can be used for both business and private calls, with no extra tax or National Insurance to pay either by the employer or the employee.
On the other hand, if an employer provides an employee with a company asset, such as a computer, for private use or for mixed business and private use, then the employer has to pay Class 1A National Insurance on the value of that asset, and it’s a taxable benefit for the employee.
Assets provided for business use only, or with an insignificant amount of private use, would be exempted from this.
In other words - it could be more expensive to provide an employee with a company computer than a company mobile phone. And because a smartphone used to be classed as a computer, it could cost more to give employees smartphones than to give them ordinary mobile phones.
Not any more.
HMRC now say that they will treat a smartphone as a mobile phone rather than as a computer.
So if, as an employer, you provide your employees with one mobile phone and it just happens to be an iPhone or a BlackBerry, you no longer have to treat it as a computer and potentially pay Class 1A National Insurance on it.
And HMRC also say that because their initial interpretation was incorrect, a smartphone should always have been treated as a mobile phone - so if you’ve paid any Class 1A National Insurance on a smartphone that’s the only mobile phone you provide to an employee, you can reclaim it.
There are words of caution though!
HMRC have said that what they’re now considering to be a mobile phone is a smartphone using technology that’s current at the beginning of 2012. They’re hedging their bets here to allow for the guidance to be changed if technological advances continue apace.
They’ve also said:
“The definition [of a mobile phone] does not cover apparatus that is designed or adapted for a primary purpose other than transmitting or receiving spoken messages, even if that apparatus is also capable of being used in this way.
Examples of apparatus that does not fall within the definition of a mobile phone include satellite navigation devices, devices that are solely PDAs and tablet and laptop computers. In general, devices that use Voice Over Internet Protocol ('VOIP') systems to make and receive phone calls will not satisfy the primary purpose test.”
In other words, an iPhone is a mobile phone, an iPad isn’t.
This to me says that HMRC are moving with the times and accepting that a large part of the working population have smartphones.
How about tax relief on the use of free services like Skype next?
- Guest blog post: self-employed? Here’s how to take control of your pension situation
- 2-Step Verification is here!
- What we’ve learned about Making Tax Digital from the new consultation documents
- Video: limited company directors’ responsibilities explained by HMRC
- Change to browser requirements