BlackBerrys, iPhones and other smartphones will no longer be viewed as benefits in kind, following a change of heart from HMRC.
On Monday, HMRC announced that it had changed its interpretation of the legal definition of “telephone apparatus” to include mobile phones and smartphones. The announcement was made public in Revenue & Customs Brief 02/12, 'Employment income - definition of mobile phone (treatment of smartphones)'. As a result, employers will no longer need to record smartphones on P11Ds, nor pay Class 1A NICs on the supposed benefits of the smartphones. The brief notes that many employers have already ceased doing so under separate provisions, but those who have done so, and their employees could seek refunds on amounts paid going back to 2007-08.
When the Finance Act 2006 was upgraded to exempt mobile phone use from tax, HMRC did not consider multimedia-equipped smartphones to qualify. Under the department’s new interpretation of s316 of the Income Taxes (Earnings and Pensions) Act 2003 there will be no assessment of a benefit in kind if the employer provides a single device whose sole purpose is to allow an employee to perform their job, on the condition that private use is not significant. For more technical detail on this exemption see the Employment Income Manual at EIM21611 and for the changes introduced relating to mobile phones, see EIM21779.
“HMRC now accepts that smartphones satisfy the conditions to qualify as mobile phones,” the brief explains. “Developments in PDAs following the penetration of smartphones into consumer markets from late 2007 onwards mean that many modern consumer PDAs are now also likely to be smartphones. But this will not apply to devices that are solely PDAs.”
Nor will the “primary purpose” test apply to sat nav devices, tablet/laptop computers and devices that use voice over internet protocol (VoIP) to make calls. However, the brief added that its view applies to what is understood as a smart phone at the beginning of 2012 and it cannot be certain about how the definition of “mobile phone” in s316 ITEPA 2003 will apply to new devices in the future.
On Monday, HMRC announced that it had changed its interpretation of the legal definition of “telephone apparatus” to include mobile phones and smartphones. The announcement was made public in Revenue & Customs Brief 02/12, 'Employment income - definition of mobile phone (treatment of smartphones)'. As a result, employers will no longer need to record smartphones on P11Ds, nor pay Class 1A NICs on the supposed benefits of the smartphones. The brief notes that many employers have already ceased doing so under separate provisions, but those who have done so, and their employees could seek refunds on amounts paid going back to 2007-08.
When the Finance Act 2006 was upgraded to exempt mobile phone use from tax, HMRC did not consider multimedia-equipped smartphones to qualify. Under the department’s new interpretation of s316 of the Income Taxes (Earnings and Pensions) Act 2003 there will be no assessment of a benefit in kind if the employer provides a single device whose sole purpose is to allow an employee to perform their job, on the condition that private use is not significant. For more technical detail on this exemption see the Employment Income Manual at EIM21611 and for the changes introduced relating to mobile phones, see EIM21779.
“HMRC now accepts that smartphones satisfy the conditions to qualify as mobile phones,” the brief explains. “Developments in PDAs following the penetration of smartphones into consumer markets from late 2007 onwards mean that many modern consumer PDAs are now also likely to be smartphones. But this will not apply to devices that are solely PDAs.”
Nor will the “primary purpose” test apply to sat nav devices, tablet/laptop computers and devices that use voice over internet protocol (VoIP) to make calls. However, the brief added that its view applies to what is understood as a smart phone at the beginning of 2012 and it cannot be certain about how the definition of “mobile phone” in s316 ITEPA 2003 will apply to new devices in the future.
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