01227 811745

Change in tax treatment of smart phones

BlackBerrys, iPhones and other smartphones will no longer be viewed as benefits in kind, following a change of heart from HMRC.

HMRC have announced that it has changed its interpretation of the legal definition of "telephone apparatus" to include mobile phones and smartphones.  As a result, employers no longer need to record smartphones on P11Ds, nor pay Class 1A NICs on the supposed benefits of the smartphones.

Many employers will have already stopped treating smart phones in this way, but those who have not could seek refunds on amounts paid going back to 2007-08, with employees seeking similar recovery.

The problem arose when mobile phone use was exempted from tax in the Finance Act 2006. Not unreasonably, most users consider smart phones to simply be a variant of the traditional mobile phone. However at the time the exemption was introduced, HMRC thought differently and did not allow multimedia-equipped smartphones to qualify.

Under the new approach, there will be no benefit in kind provided the primary purpose is to allow an employee to perform their job, on the condition that private use is not significant.

It should be noted that this does not apply to non-smart phone PDAs, sat nav devices, tablet/laptop computers and devices that use voice over internet protocol (VoIP) to make calls, which will potentially continue to attract a taxable benefit.